Cade approves purchase of Unidas by Localiza with restrictions
Companies signed a confidential agreement and will have to sell assets
Published in 15/12/2021 - 16:13 By Wellton Máximo – Repórter da Agência Brasil - Brasília
In a tight judgment, the Administrative Council for Economic Defense (Cade) approved, with restrictions, the purchase of the Unidas car rental company by Localiza. The companies signed an agreement and will have to sell assets, including one of the brands, to reduce market concentration.
The terms of the agreement are confidential and were not disclosed by Cade. The merger of the rental companies was approved by 3 votes to 2. The rapporteur, Lenisa Prado, voted in favor of the operation; the president of Cade, Alexandre Cordeiro Macedo, and the councilor Luiz Hoffmann.
Board members Sérgio Ravagnani and Paula Azevedo voted against, claiming that the sale agreement would be insufficient to reduce the risks caused by the new company's market concentration. Counselor Luis Braido declared himself impeded and did not participate in the trial. With the judgment tied by 2 to 2, it was up to Cade's president to vote in favor and untie the process.
In September of last year, Localiza announced the purchase of Unidas. The deal would generate a company with a concentration of 72% in the car rental market in Brazil, if Cade had not imposed conditions. With a market value of over R$50 billion, the new company would have a fleet of 470 thousand vehicles in Brazil and in several Latin American countries, without the sales agreement.
Cade analyzed the case since January. In the decision, the president of the agency informed that the measures to avoid market concentration are sufficient to maintain competition in the sector. "The post-agreement operation without medicines increases the participation [of the new company] to 50% and with medicines to below 50%", highlighted Macedo. This percentage considers the participation in the vehicle rental and fleet outsourcing markets for companies.
When voting against the operation, councilor Paula Azevedo said that the sales agreement will hardly be able to maintain competition in these two markets. “In addition to the insufficiency of the remedies, against the approval of the operation, there is also the inexistence of proven efficiencies and the fragility – or even absence – of economic rationality in the operation”, he declared.
The body responsible for monitoring and ensuring market competition, Cade's objective is to maintain competition in order to prevent economic abuses caused by market concentration by large companies.
Text translated using artificial intelligence.
Edition: Valéria Aguiar