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Specifically citing potential benefits for corporate customers, Avis Budget Group paid about $60 million for 45 percent of chauffeured transportation firm Carey International, with a conditional option to grow its ownership stake to roughly 80 percent over the next year.
Carey, which will maintain its existing leadership, generated about $250 million in revenue last year, the companies said. "With this investment, Avis Budget Group expects to be able to offer corporate customers and travel partners the most complete portfolio of local ground transportation products and services available anywhere," according to Avis Budget Group chairman and CEO Ronald Nelson.
Led by private equity firm Chartwell Investments, Carey's investor group continues to hold majority ownership following the closing of the Avis Budget investment.
An Avis Budget spokesperson said the initial transaction would result in no headcount changes. "Although when we get to looking at the option [to acquire up to 80 percent], we would obviously have to take a look at possible synergies and where integration might or might not make sense. This is an acquisition and an alliance that we expect will generate growth, so we're focused on making two pies bigger," he said.
"It's about packaging," said Carlson Wagonlit Travel Solutions Group managing director of ground transportation Dave Kilduff, a former car rental industry sales exec. "There will be a much larger sales force that not only has solutions in car rental--and for that you can get a chauffer for the rent a car--but also now they actually have a chauffeured vehicle."
Avis in June announced a separate service allowing customers to "rent a car and hire a professional driver at the same time." Avis Chauffeur Drive is available in the metropolitan areas of Boston, Chicago, Dallas, Detroit, Los Angeles, Miami, New York, Phoenix, San Francisco and Washington, D.C., and offered in conjunction with WeDriveU, a provider of "fully insured and certified chauffeurs."
The spokesperson suggested corporate clients would enjoy "one-stop shopping" for car rental and limo services. Asked about the possibility of combining corporate contracts to cover both car rental and limo services, Kilduff said, "I would certainly think it makes sense to do that. In most cases, the customer would be the same person. And contracts are similar in that, recently, there has been a lot of unbundling with fleet and fuel costs going up for both." For clients buying both rental car and chauffeured services, combining volume ostensibly would lead to better deals.
The Avis Budget spokesperson also suggested the arrangement would help Carey International with technology development. " Companies that are in the limo and chauffeured services segment are not on a par technologicallywith, say, airlines and hotel and car rental companies, when it comes to helping travel managers manage their spend," he said. Although he did not expect Carey to use the Avis Interactive reporting system, the spokesperson said, "The idea would be that over time, we would be able to provide a similar type of tool unique to Carey, so travel managers would have robust ability to monitor and report on their spend. From Carey's perspective, why develop that when you can have an alliance with someone?"
The official said Avis Budget would help Carey International develop Internet-based bookings, while Carey's experience in group travel would benefit Avis Budget.
Kilduff said the crossover was unusual, although National Car Rental temporarily experimented with its own startup chauffeured services many years ago.
"I'm sure other suppliers will sit back and look at this," said Kilduff. "I do think consolidation will continue going forward, more on the rent a car side of it than a car rental company buying a limo company."
The conditions for Avis Budget obtaining the larger, 80 percent stake in Carey "would likely include the assumption or repayment of Carey's existing indebtedness," according to the two companies. They described Carey as "the market share leader in the approximately $5 billion chauffeured ground transportation category. Carey operates in 550 cities and 60 countries through its network of franchisees and alliance partners."
Carey International president and CEO Gary Kessler and executive vice president and CFO Mitchell Lahr will continue to run Carey from its offices in Washington, D.C.
A prepared statement quoted Kessler referring to "opportunities for us to leverage Avis Budget's strong customer relationships, technological capabilities and vehicle services expertise."
The move follows the acquisition earlier this year of Vanguard Car Rental by owners of Enterprise Rent-A-Car, combining the Alamo, Enterprise and National brands. Those firms integrated their corporate travel sales programs.
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