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Brookfield To Invest USD60m in Brazil’s Ouro Verde

28 March 2022

Brookfield Asset Management agreed to invest USD60m in Brazil-based corporate rental and fleet management company Ouro Verde. Brookfield acquired the company in 2019.

(Valor International) Ouro Verde — one of Brazil’s largest vehicle fleet outsourcing — announced Monday that Canadian investment fund Brookfield, which owns 100% of the company since 2019, will contribute $60 million to the business this year. The new contribution is 50% higher than last year’s $40 million. The first part of the investment ($35 million) will immediately go into the cash flow, while the remainder was left for the second quarter.

According to the company’s CEO, Cláudio Zattar, the injection will help in the expansion of the fleet, especially in the segment of vehicle subscription. Today, the business serves small and medium-sized companies, but the goal is to open it to individuals by January.

“The new investment demonstrates the confidence of the shareholder. It gives us a more solid base to continue investing”, the executive told Valor.

Ouro Verde, the fourth largest rental company in number of fleets, had last year a net operating revenue of R$917.2 million, up 12.4%. Net income totaled R$35.4 million, compared with a negative result of R$5.6 million in 2020. The company ended the year with 35,447 vehicles and equipment available (only light vehicles were 26,372), a growth of 51% compared to 2020.

The challenge today is to buy vehicles on the market. Mr. Zattar said that on the heavy-duty side the negotiations with automakers have been more favorable. “We have managed to close a delivery schedule,” he said. The car industry has had problems to produce, especially because of the shortage of electrical components.

Even so, the group has managed to expand its subscription business. The segment’s total fleet had about 5,000 vehicles registered in February. “Our ambition is to double this number by the end of the year,” he said.

The group’s goal is to complete a technological upgrade by the middle of this year and with that prepare the subscription model to be scaled also for individuals by January.

The car subscription segment has been pointed out by the car rental companies as the apple of the eye in the sector. Among the leaders (Localiza, Movida and Unidas), all have already launched services to attract this public. None of them, however, give details. Executives from Movida at one point said that the segment may surpass even car rental in the future.

The Brazilian Association of Car Rental Companies (Abla) estimates that the segment accounted for between 8% and 9% of the total fleet of car rental companies in the country last year, of 1.136 million.

Mr. Zattar said that the group also intends to expand Ouro Verde Smart to the heavy vehicle segment, offering the service to small and medium-sized companies. Simultaneously, the group has been studying an alternative to offer some kind of subscription to individual truck drivers.

The plan is to develop a program in partnership with transportation companies in which their independent truck drivers will be classified – not only by how long is the relationship, but also by efficiency. The guarantee, in this way, will be a risk to be shared between Ouro Verde and the transport company.

The market has considered Ouro Verde one of the main candidates to evaluate the assets to be divested by Localiza to get the approval of the antitrust watchdog Cade to buy Unidas.

Mr. Zattar also said that Ouro Verde does not have the capital for an asset of this level. “At the moment, only Brookfield could have this capacity. And they are discreet, they don’t comment on speculations,” he said.

Sources pointed out that the divestment in vehicles alone is likely to be between 45,000 and 50,000 units, besides branches and sites in airports. The total value of the package has been estimated behind the scenes at about R$4 billion, but there are still several question marks, since the decision to close the deal, approved in mid-December, has not yet been published.