Volkswagen explores acquisition of French car rental group Europcar

German automaker Volkswagen is in talks to acquire French car rental firm Europcar Mobility Group SA, in a deal that would enable the automaker to better capitalize on its fleet, people knowledgeable with the matter said on Tuesday.

The acquisition would come as Europcar is having a hard time to cope with the economic fallout of the COVID-19 coronavirus pandemic, which has weighed on travel across the world and sapped demand for car rentals. It would represent a reversal for the automaker, which sold Europcar to investment firm Eurazeo SE in 2006.

Volkswagen has reached out to Europcar to talk about its interest in the acquisition and carry out due diligence, one of the sources stated. The talks are preliminary and a deal is uncertain given the financial toll of the coronavirus outbreak on Europcar, the sources said.

Europcar, having a market capitalization of 390 million euros ($441 million) and net debt as of the end of March of over 1 billion euros ($1.13 billion), has also caught interest from private equity firms, including Apollo Global Management Inc, the sources said.

Volkswagen, Apollo, and Eurazeo, which presently owns nearly 30% of Europcar, refused to comment.

When Volkswagen divested Europcar in 2006, it stated it could be a mobility services provider without owning a short-term automobile hire company. A new deal for Europcar would enable Volkswagen to buy it back at a major discount to the 3.32 billion euros ($3.75 billion) it sold it for 14 years earlier.

Europcar is hoping to avoid the fate of Hertz Global Holdings Inc, which filed for bankruptcy protection in May this year.

Last month, Europcar stated it secured a 307 million euro ($347 million) financing package to deal with the coronavirus crisis, which included a 220 million euro ($248 million) loan guaranteed at 90% by the French state.