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Monday, April 26, 2010

Hertz to Buy Dollar Thrifty for $1.2 Billion, Boosting Lead in Car Rentals


Hertz Global Holdings Inc., the world’s largest car-rental company by market value, agreed to buy Dollar Thrifty Automotive Group Inc. for about $1.2 billion in cash and stock as a rebounding global economy spurs travel.

The offer is worth $41 per share, Hertz said in a press release carried by Marketwire today. That’s a 5.5 percent premium, based on Dollar’s last traded price.

Hertz also raised its full-year earnings forecast as business travelers and holidaymakers resume making trips and hire more cars following last year’s global recession. The Dollar acquisition will expand Hertz’s global network to 9,800 outlets and help the company win sales in the leisure sector, particularly in Europe and overseas, the company said.

“The performance of rental-car companies is very closely tied to the economy,” said Koji Endo, managing director of Tokyo-based Advanced Research Japan. “It probably makes sense for them to merge.”

The International Monetary Fund last week raised its 2010 global growth forecast to 4.2 percent from 3.9 percent. Worldwide airline passenger traffic rose 9.5 percent in February from a year earlier, the biggest jump in more than two years, according to the International Air Transport Association.


Hertz has already identified cost-savings of at least $180 million from the deal, including in car purchasing and information technology systems, it said.

“We believe the deal is attractive, accretive to earnings and structured to maintain Hertz’s strong credit profile,” Chairman and Chief Executive Officer Mark P. Frissora said in the statement. “Together, we will be able to compete even more effectively and efficiently against other multibrand car rental companies.”

Hertz gained 1.2 percent to $12.88 in New York on April 23. Dollar Thrifty, based in Tulsa, Oklahoma, rose 0.5 percent to $38.85.

Under the terms of the agreement, Dollar shareholders will receive $32.80 in cash, including a special dividend from Dollar, and 0.6366 of a Hertz share for each stock they hold, according to the statement. The per-share price was based on the April 23 close, said Park Ridge, New Jersey-based Hertz. Dollar has 28.6 million shares, according to data compiled by Bloomberg.

Hertz expects to report full-year adjusted pretax income in the range of $290 million to $305 million and sales of as much as $7.7 billion, it said today. First-quarter sales increased 6.1 percent to $1.7 billion. The company narrowed its net loss in the period to $150.4 million from $163.5 million.

Barclays, Merrill

Barclays Plc and Bank of America Corp.’s Merrill Lynch advised Hertz on the deal, with Debevoise & Plimpton LLP and Jones Day providing legal advice. Dollar Thrifty was advised by JPMorgan Chase & Co., Goldman Sachs Group Inc. and law firm Cleary Gottlieb Steen & Hamilton LLP.

North American companies have been involved in acquisitions worth $261 billion so far this year, falling from $364 billion a year earlier, according to data compiled by Bloomberg. The global figure is $616 billion, compared with $610 billion.

Hertz is the largest worldwide airport car-rental brand, operating from more than 8,200 locations in 146 countries, the release said. Ford Motor Co. in December 2005 sold Hertz to Clayton Dubilier & Rice Inc., the Carlyle Group and Merrill Lynch’s buyout unit. The car-rental company raised $1.32 billion in an initial share sale less than a year later.