Europcar - VW's overwhelming motives

All, 

Please refer to our unchanged analysis/model here.

We remain long the 24s for 4% of NAV at 53c/E. 

As per our thoughts then, VW have a very strong interest in the survival and to an extent control of Europcar. Rumours of VW exploring a bid for or taking a stake in Europcar make a lot of sense to us. VW have owned Europcar before (Eurazeo) and as per our analysis the pretty graph (below) of the well diversified fleet as seen in the prospectus is not reflecting the full truth. It seems the graph only covers the group’s “acquisitions”, i.e. the vehicles Europcar buys. We understand that E400m (or the vast majority) of the operating lease lines (accounting for 41% of vehicles) are with the VW group however, which would be in addition to the “acquisitions”. VWs actual exposure to Europcar’s fleet could therefore lie above 60%. 

VW also seem to carry potential other liabilities: 

To VW, a stake in Europcar, Europe’s largest car purchaser whose largest market is Germany, would represent a chance to cement its dominance of Europe’s biggest showroom, which as we wrote could come under pressure to favour French cars instead - losing VW 2x the exposure in competitive terms and an important valve for any excess production capacity. Barriers to entry to this business are considerable - even more so with the current lack of visibility. So if we were running any mainstream OEM, we’d be looking to buy rental companies too, even if the deal may be borderline dilutive in the short run.

Wolfgang