Hertz Ups Bid for Dollar Thrifty - Analyst Blog

Hertz Global Holdings Inc. (HTZ) has raised its offer price for Dollar Thrifty Automotive Group Inc. (DTG) to $50.00 per share, amounting to $1.56 billion. The offer consists of $43.60 in cash (including about $6.87 a share to be paid by Dollar Thrifty as a special cash dividend) and 0.6366 of a Hertz common share. Per the new agreement, Hertz Global added $10.80 a share to the cash consideration from the original $32.80 per share.

 

Earlier in April, Hertz Global had proposed to acquire Dollar Thrifty for a purchase price of $41.00 per share. The purchase comprised an 80% cash consideration and 20% in stock.

 

Antitrust clearance is a central issue in the deal. If the clearance is not obtained, the company will have to pay a reverse termination fee of $44.6 million to Dollar Thrifty. Hertz Global is also in the process of divesting its low-cost unit, Advantage Rent-a-Car, to speed up the transaction.

 

The acquisition of Dollar Thrifty will help Hertz Global serve rental customers in six continents from approximately 9,800 locations. In the U.S., the company will be able to offer a full range of rental options from Hertz to Dollar Thrifty, giving it a competitive edge over its competitors. Dollar Thrifty's global exposure, complementing Hertz's, will help the consolidated company fortify a rental strategy in Europe and in other markets.

 

When Hertz Global had initially proposed the Dollar Thrifty acquisition, it had already identified synergies worth at least $180 million, primarily in fleet, IT systems and procurement, which would aid in a lower cost of operation.

 

The company's competitor, Avis Budget Group Inc. (CAR), is also in the fray to acquire Dollar Thrifty. Earlier this month, Avis Budget Group offered $40.75 a share in cash and 0.6543 shares for each Dollar Thrifty share, giving a total value of just under $1.4 billion. This bid was an increase from an earlier offer of $39.25 per share in cash and 0.6543 shares for each Dollar Thrifty share. However, with Hertz Global increasing the bid value, Avis Budget's proposal is likely to be shelved.

 

During the second quarter conference call, management guided full-year 2010 revenue in the range of $7.5 billion to $7.7 billion and earnings of 43 cents to 45 cents.

 

The Zacks Consensus Estimate for fiscal third-quarter 2010 earnings is 35 cents per share. For full year 2010 and 2011, the Zacks Consensus Estimates are, respectively, 45 cents per share and 75 cents per share.

 

The quantitative Zacks #3 Rank (short-term Hold rating) for Hertz Global indicates no clear directional pressure on the shares over the near term.

 

Headquartered in Tulsa, Oklahoma, Dollar Thrifty Automotive Group Inc., through its subsidiaries, rents and leases vehicles via company owned and franchised stores under Dollar and the Thrifty brand names primarily in the United States and Canada.

 

Headquartered in Park Ridge, New Jersey, Hertz Global Holdings, Inc., through its subsidiaries, engages in the car and equipment rental businesses worldwide. The company also serves various industries, such as construction, petrochemical, automobile manufacturing, railroad, power generation, and shipbuilding.