Corporate m&a people seldom get the much better of exclusive equity. so that they need whooped and punched air at reports that vw may buy paris-based automobile leasing team europcar from eurazeo for an enterprise value of 1.8bn. the german automobile giant offered europcar into the buyout group for 3.1bn in 2006.

But it is nearly as simple as vw attempting to sell high and buying low. eurazeo and a subsidiary already sold stock well worth some 1.8bn in the expanded europcar. so personal equity seems to have cleaned its face, just because returns were unexceptional.

Nor does a purchase at the same time when automobile rental companies tend to be cheap make this a good deal for vw. europcar stocks have already been wallowing significantly more than 80 per cent below their 2017 top. coronavirus has left lots of holiday local rental cars parked idly. recovery might be sluggish.

Charts shows enterprise value (bn) showing europcar takes a winner and income after dividends (bn) showing vw can barely manage its payout

Debt on businesses amounts to just over 1.4bn, including leases. that's 4.6 times estimated ebitda for 2021. with a 30 per cent advanced, vw might pay 13 times 2021 earnings, in which europcar traded 36 months back.

Vw is burning up lots of fuel. it has delayed its $2.9bn package to take control of truckmaker navistar but clearly plans to go-ahead. in addition, you have the argo ai independent operating partnership with ford for which vw at some point must spend around $1bn. after that, you have the dividend 2.9bn just last year the strength of which jefferies questions.

Europcar at the very least has a better business model than hertz, which recently submitted for personal bankruptcy. the usa group keeps its leasing cars to offer eventually into the used market. that is great when costs are increasing, but the trend has ended. in comparison, europcar hedges via a buyback system with automobile makers. stock markets have nevertheless knocked its share price poorly given the travel industrys shutdown.

Vw will see a chance to take advantage of the longer-run leads that flexible automobile ownership presents. it could similarly wish another channel into which to stuff undesired inventory. however, this offer seems like a detour stockholders don't need.

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