Warburg Pincus-Backed China Auto Rental Scores Investment From Hertz

American car rental giant, the Hertz Corporation, has agreed to acquire an approximately 20% stake in China Auto Rental (CAR), a Chinese car rental company headquartered in Beijing.

The amount and the valuation of the investment are not available.

The investment will significantly increase Hertz’s presence in China’s rapidly expanding car rental market. China’s domestic car rental business is expected to grow more than 15% annually through 2016.

Last July, American private equity firm Warburg Pincus sank US$200 million for an undisclosed minority stake of China Auto Rental. The Beijing company had planned to IPO in the U.S. last April, but canceled after market deteriorated.

Estimating the valuations of the two deals is difficult. According to Securities and Exchange Commission filings last April, China Auto Rental’s adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) during the first and fourth quarter of 2011 were RMB44 million and RMB125 million. It grew to RMB198 million in the first quarter of 2012. But as late as the fourth quarter of 2011, China Auto Rental ran a net loss of RMB34 million.

The filings also showed that Legend Holdings owns a 65 percent stake in China Auto Rental. Legend Holdings is the parent company of Chinese private equity firm, Hony Capital. It is not clear from whom Hertz purchased its 20% stake.

Mark P. Frissora, chairman and CEO of Hertz says in a statement that "China Auto Rental…doubled its revenues in 2012 to US$250 million," and that is 2.5 times larger than any other Chinese car rental company.

According to Warburg Pincus’ website, China Auto Rental has a fleet of approximately 32,000 vehicles as of June 30, 2012. It also has nearly 600 service locations in 66 major cities and 52 major airports across China.

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