Avis Budget Group has acquired a 50-percent ownership stake in its Brazilian licensee, which the company said involves the investment of $50 million to enable the company to expand the presence of its Avis and Budget brands in the Brazilian car rental market.
"Expanding our global footprint and increasing our presence in faster-growing markets are two of our key strategic growth initiatives, and investing in South America's largest economy is consistent with these goals," said Ronald L. Nelson, Avis Budget Group Chairman and Chief Executive Officer.
Avis said it has operated in Brazil since 1978 and that its licensee in Brazil has operated the Avis brand in the country since 2003, and the Budget brand since 2005. Avis and Budget provide vehicle leasing and rental services with a fleet of more than 4,000 cars in Brazil. The company operates more than 40 rental lcoations in Brazil, including at the Congonhas and Guarulhos airports in Sao Paulo, at Santos Dumont and Galeão airports in Rio de Janiero, and at airport and off-airport locations.
As part of the investment, Avis Budget Group said it expects to record an impairment charge of approximately $30 million in the third quarter, related to its licensee’s pre-existing debt.
Avis Budget Groups said the Brazilian car rental market is expected to hit $4 billion in revenue by 2016, with growth driven by increases in domestic and international tourism. Future events and factors that Avis Budget expects will positively affect growth include the 2014 FIFA World Cup, the 2016 Olympic Games, increasing business travel spending, improvements to airport infrastructure, and better access to long-term financing.