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VOL. 36 | NO. 34 | Friday, August 24, 2012
Hertz buying Dollar Thrifty for about $2.3 billion
NEW YORK (AP) — Hertz is one-step closer to its long-awaited prize.
More than two years after its original bid, it agreed Sunday to buy Dollar Thrifty Automotive Group Inc. for about $2.3 billion, giving it more ways to attract travelers and expand its international presence. It will also give the company a leg up against competition from an increasing number of smaller competitors.
At $87.50 per share, the deal is worth far more than any of Hertz's previous bids and about 8 percent higher than Dollar Thrifty's closing price Friday.
Nothing will change immediately for consumers. Travelers that rent through Dollar Thrifty will still visit that counter for service. In the long run, prices in many markets will almost certainly rise as the two companies streamline their operations.
Both rental companies have grown stronger and more valuable in the years since they first considered teaming up. Both stocks have almost doubled in value, and they've reported robust quarterly financial results as the volume of car rentals soared. But still-fierce competition has prevented the industry from raising prices, which has dragged on revenue. Fewer big competitors mean a better chance of higher rates.
The push-and-pull between two of the nation's largest car rental companies started in 2010. Avis Budget Group was also in the mix, pursuing a bid for Dollar Thrifty for more than a year.
Avis dropped its bid nearly a year ago citing market conditions. Then, in October of last year, Hertz dropped its bid, too. But Dollar Thrifty didn't trust that the years of attempts were over. In February, it extended its shareholder rights plan known as a "poison pill" — a maneuver designed to deter any unsolicited attempts to take over the company — through May 2013.
More recently, it appeared Dollar Thrifty was open to another bid. Earlier this month, it urged for either a "compelling offer" or an end to the "constant distraction of merger speculation."
Then last week, media reports said that Hertz Global Holdings Inc. of Park Ridge, N.J., was considering a new bid for Tulsa, Okla.-based Dollar Thrifty.
Hertz expects that the acquisition will save it at least $160 million a year, while providing the opportunity for increased sales.
In an interview Monday with The Associated Press, Hertz Chairman and CEO Mark P. Frissora said this deal will help it fight against a growing number of small regional rental companies popping up in airports across the country. He said those competitors, along with European rivals like Germany's Sixt doing more U.S. business, will likely cause the rate wars to continue for now.
Both Hertz and Dollar Thrifty's boards have unanimously approved the deal, which still needs antitrust clearance from the Federal Trade Commission. Hertz said it has stayed in close contact with the FTC to secure clearance and that Dollar Thrifty will fully cooperate with the process.
Frissora is confident the two companies will be able to get the deal "swiftly approved" by regulators. He said the deal is more of a certainty this time around because of the massive preparation Hertz undertook before the deal was announced.
Hertz is also selling its Advantage business to rental car company Franchise Services of North America and Macquarie Capital for undisclosed terms. The Advantage deal depends upon Hertz completing the Dollar Thrifty buyout.
Hertz has about 8,650 corporate and licensee locations in approximately 150 countries in North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand. Dollar and Thrifty have approximately 280 corporate locations in the United States and Canada. The company also has about 1,300 franchise locations in 82 countries.
Hertz shares gained $1.32, or 10 percent, to $14.47 in afternoon trading Monday. Dollar Thrifty shares rose $6.05, or 7.5 percent, to $87.05.