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By Jonathan Stempel
NEW YORK, March 30 (Reuters) - Enterprise Rent-A-Car on Friday said it agreed to buy Vanguard Car Rental Group Inc., the parent of National Car Rental and Alamo Rent A Car, combining the largest and fourth-largest U.S. car rental companies by revenue.
Terms were not disclosed. Enterprise generated $7 billion of revenue from U.S. rentals in 2006, while Vanguard generated $2.14 billion, according to trade publication Auto Rental News. The combined company would have more than 1 million vehicles.
Avis Budget Group Inc. CAR.N and Hertz Global Holdings Inc. (HTZ.N) ranked second and third in U.S. rentals in 2006, while Dollar Thrifty Automotive Group Inc. DTG.N ranks fifth, Auto Rental News said.
St. Louis-based Enterprise and Tulsa, Oklahoma-based Vanguard, which are privately held, said the transaction combines complementary businesses. Enterprise specializes in in-town rentals, and in renting replacement vehicles to people whose vehicles are damaged in accidents. Vanguard mainly serves customers who rent at airports.
“It is a change in Enterprise’s strategy,” said Betsy Snyder, a credit analyst at Standard & Poor’s. “They have been building their airport presence, but it’s a much more competitive and cyclical business than their main business.”
She added that while National focuses on corporate customers, “Alamo, like Enterprise, focuses more on leisure customers. There would seem to be some overlap.”
Enterprise said it employs 65,000 people in 7,000 offices worldwide, while Vanguard said it employs 9,000 people in more than 3,800 locations.
In a statement, the companies said “inevitably there will be duplication,” but did not say how many jobs might be cut. They have also yet to settle on a management team, or decide where the combined company will be based.
Enterprise is run by Andrew Taylor, whose father Jack founded the company in 1957. National was created in 1947 and Alamo in 1974, and Vanguard was incorporated in 2003. Vanguard’s chief executive is William Lobeck.
The transaction is expected to close in the third or fourth quarter of 2007, pending antitrust clearance.
Snyder said she doesn’t expect antitrust problems given the intense competition and Enterprise’s small market share at airports. She said she may lower Enterprise’s “A-minus” credit and debt ratings, but expects them to remain investment grade.