Tags: Hertz Makes New Offer for Dollar Thrifty in Bid to Thwart Avis

Hertz Lifts Buyout Offer for Dollar Thrifty to $2.25 Billion, Aims to Thwart Avis

Monday, 09 May 2011 07:27 AM

Car rental company Hertz Global Holdings Inc. is raising the stakes in its pursuit of Dollar Thrifty Automotive Group Inc. in hopes of besting rival Avis Budget Group Inc.'s efforts to acquire the Oklahoma-based rental agency.

The two companies have been in a virtual tug-of-war over Dollar Thrifty for a little more than a year, with both looking to snag the Tulsa, Okla., company because its clientele is largely the leisure traveler. Hertz and Avis cater mostly to business travelers, so a Dollar Thrifty acquisition would automatically give either one a broader appeal.

Hertz sweetened the pot on Monday. Its new proposal is worth $72 a share in cash and stock. This includes $57.60 in cash and 0.8546 shares of its common stock. With 31.2 million fully diluted shares of Dollar Thrifty, the Hertz bid is worth about $2.25 billion.

The revised offer is 3.3 percent above Dollar Thrifty's closing price Friday of $69.69 a share.

Investors appeared to be betting that the bidding will go higher. Dollar Thrifty shares climbed $8.08, or 11.6 percent, to $77.77 in morning trading. Hertz's stock gained 60 cents, or 3.6 percent, to $17.45, while shares of Avis fell 28 cents to $18.13.

Hertz's revised bid is likely meant to appeal to Dollar Thrifty's stockholders. Dollar Thrifty shareholders stung Hertz in September when they rejected an offer that included $43.60 in cash and 0.6366 shares of common stock. Dollar Thrifty's board had recommended stockholders accept the deal.

At the time, industry experts speculated that Dollar Thrifty shareholders favored a potential deal with Avis because it was more money than Hertz was offering. Avis had offered $45.79 per share in cash and 0.6543 shares of Avis.

At Friday's price for Avis, that bid was worth $1.74 billion.
Dollar Thrifty had asked Avis in October not to make a formal offer so that the two companies could work together with antitrust authorities. Avis, based in Parsippany, N.J., agreed to wait.

Avis spokesman Andrew Siegel said Monday that the company was declining comment on the Hertz offer. A call to Dollar Thrifty for comment on Monday was not immediately returned.

In making its latest bid, Hertz said it will sell its Advantage brand. Chairman and CEO Mark Frissora said during a conference call that Hertz already has five interested parties holding talks and feels confident a sale can be accomplished in a short period of time.

Hertz is also in discussions with the Federal Trade Commission about how to close the deal quickly. Frissora said the Park Ridge, N.J. company is aiming to close the transaction before the end of the third quarter.

Frissora says Avis has been in lengthy talks with the FTC over its offer "with no end in sight."

Frissora said Hertz has been "waiting and watching for a long time" as Avis and Dollar Thrifty have dealt with the FTC. Hertz realized last week during Avis and Dollar Thrifty's earnings conference calls that no progress had been made and decided that it was the right time to make another move, he explained.

In a letter sent to Dollar Thrifty President and CEO Scott Thompson on Monday, Frissora said the transaction was "the highest priority for Hertz," and that its board and management team unanimously supports the transaction.

The company says its offer is not subject to any financing condition and would likely be paid for with cash on hand and new borrowings.

The proposed buyout is anticipated to add to Hertz's earnings per share the first full year after the deal closes.

The potential Dollar Thrifty acquisition is a sign of the times within the car rental industry. The sector has been consolidating for years after hitting a peak of about $30 billion in revenue in 2007, according to research firm IBISWorld.

In 2002, Avis' parent company bought Budget, while Enterprise's parent company acquired Alamo and National in 2007.

In the U.S., Enterprise is the dominant player with 37 percent of the market, followed by Hertz at 20 percent. Avis Budget has a 17 percent share, and Dollar Thrifty has under 7 percent, according to IBISWorld.

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Car rental company Hertz Global Holdings Inc. is raising the stakes in its pursuit of Dollar Thrifty Automotive Group Inc. in hopes of besting rival Avis Budget Group Inc.'s efforts to acquire the Oklahoma-based rental agency. The two companies have been in a virtual...
Hertz Makes New Offer for Dollar Thrifty in Bid to Thwart Avis
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