Hertz to Buy Dollar Thrifty
Car rental company Hertz Global Holdings Inc. plans to acquire rival Dollar Thrifty Automotive Group Inc. for $1.27 billion in cash and stock, giving Hertz a larger foothold in the leisure-rental market while its core business-travel operation remains in the doldrums, The Wall Street Journal reported Monday.
The boards of both companies approved the deal Sunday. The companies said they began talks last November.
The deal marks a significant consolidation in an industry that struggled in late 2008 and much of last year under the weight of slashed travel budgets, falling used-car prices, large debt loads and the credit crunch.
Car rental demand started showing signs of life late last year, and the industry was able to raise rental rates and cut costs. Hertz said it expects Monday to raise its forecasts for revenue and pretax earnings for the year, though expects to report a first-quarter loss.
Hertz plans to keep the Dollar and Thrifty brands. The acquisition is "really about having a multibrand strategy in the leisure segment," said Mark P. Frissora, Hertz chairman and CEO.
Buying Dollar Thrifty will help Hertz better use its fleet, give it a foothold in the mid-tier car rental market, increase its locations outside airports and let it push deeper into Europe, Frissora said.
Hertz currently uses about 95 percent of its fleet during the week but only 30 percent to 40 percent during the weekend, he said. Dollar Thrifty, by contrast, uses most of its fleet during the weekend, when leisure travelers are most likely to rent, he said. The companies plan to combine fleets immediately.
Hertz plans to pay $41 a share, with 80 percent in cash and 20 percent in stock. The cash portion will come in two components -- one being a $200 million special dividend of $6.88 a share, to be paid by Dollar Thrifty, followed by $25.92 a share upon closing. The stock portion will be paid at a fixed exchange ratio of 0.64 per Dollar Thrifty share, based on Hertz's April 23 closing price of $12.88 a share. Hertz does not plan to issue debt for the purchase.
"We see Hertz's brand strategy for the combined companies as very compelling," said Scott L. Thompson, president and CEO of Dollar Thrifty, which is based in Tulsa, Okla.