Europcar and Vanguard, which operates under the brands National Car Rental and Alamo Rent A Car in Britain, also sealed a transatlantic partnership that will give Europcar's clients access to Vanguard's network in North America, the statement said.
The deal - which values Vanguard at 12.7 times its estimated 2006 operating income - must be approved by competition authorities.
Vanguard operates a fleet of 43,000 vehicles and had 2005 sales of €405 million with over two million rental contracts. It makes 84% of its revenue in Britain, where it is the market leader. It employs 32,000 people.
Europcar, with 2005 sales of €1.28 billion, a fleet of more than 200,000 vehicles and close to seven million rental contracts, is Europe's leading car rental company.
Europcar, founded in 1949, was sold six months ago by Volkswagen to French investment firm Eurazeo. Vanguard was created by New York investment firm Cerberus when it bought Alamo and National from bankrupt ANC Rental for $2.4 billion (£1.3 billion) in 2003.