Hertz to buy Dollar Thrifty for $1.2b
Shares of both companies soared.
The deal will give Hertz, already the world’s largest car rental company by locations, a third more sites around the globe, boosting its total to 9,800. More importantly, it will give Hertz’s leisure segment a much-needed boost when it assumes control of the company’s Dollar and Thrifty brands.
“Together we will be able to compete even more effectively and efficiently against other multibrand car rental companies, offering customers a full range of rental options in the US,’’ Hertz chief executive Mark Frissora said in a statement.
The move would leave three major US car rental companies, each with two or more large brands. Hertz also owns the Advantage rental car company and competes against Enterprise Holdings Inc., which has 7,600 Enterprise, Alamo, and National sites and made $12.9 billion in revenue last year; and the Avis Budget Group, which has 6,900 Avis and Budget locations and about $5.13 billion in revenue.
The announcement comes after nearly a decade of consolidation in the car rental industry. In 2002, Avis’s parent company bought Budget. In 2007, Enterprise’s parent company acquired Alamo and National.
Hertz’s business, which has revenue of $7.10 billion in 2009, is roughly evenly split between business and vacation travelers, while Dollar Thrifty’s customers are mostly vacationers hunting for cheap rentals. Dollar Thrifty had revenue of $1.55 billion.
Hertz said its bid values Dollar Thrifty, based in Tulsa, Okla., at $41 per share, a 5.5 percent premium to Friday’s closing price of $38.85. The offer is made up of 80 percent cash and 20 percent Hertz stock.
Dollar Thrifty shares have recently traded at their highest prices in almost three years as the car rental industry recovers from the recession that caused business and leisure travelers alike to shelve reservations. The stock was trading at $2 a little over year ago. It was valued at less than a dollar in early 2009 as investors worried about lower demand for rentals, falling resale prices for vehicles and problems facing its main supplier, Chrysler.
Its shares hit a three-year high of $42.60 in trading yesterday. Hertz shares rose to a two-year high of $15.60.