What’s The Hold Up With The Dollar Thrifty Deal?

Hi all,

News has been pretty scant on the proposed Hertz buyout of  Dollar Thrifty since Budget pulled out of the deal. So I thought today might be a good time to discuss where I believe the deal is at and what the possible stumbling blocks could be.

Hertz are still very keen to complete the purchase, and looking at recent market share analysis you can see why! At present Enterprise Holdings including Alamo National have a market share of around 40% and are the clear market leaders, up next is Hertz with around 20%, Avis Budget have 17% and Dollar Thrifty commands 5.7% , the top 4 companies combined have 83% of the total U.S. Car Rental market.

So Hertz’s move to buy Dollar Rent A Car will see them cement their position as the number 2 car rental company in the U.S.

Since Dollar posted a record share price high in June, a volatile market and the withdrawal of the Avis Budget  offer, Dollar’s share price has fallen 33%, even with this decline Hertz may be forced to offer $70 a share to entice the share holders to sell, this represents a 24% premium on current stock price and the second-biggest gap of any pending U.S. deal over $1 billion. However the underlying factor is that Dollar turns over higher profits than Hertz and are presently a very health and cash rich company.

The major stumbling block I can see is the potential sale of the Hertz owned Advantage Rent A Car brand. Part of seeking FTC approval for the deal would require Hertz to sell off it’s own economy brand, but with a deteriorating  U.S. market, who will have the cash or even want to take on the brand?

Dollar have set a deadline of the 10th October for all final bids to be in, however I think with Hertz being the only potential bidder this deadline will be extended.

However look for Hertz to want too get this deal done quickly rather than face competition from a newly united Avis Budget.

I’ll continue to monitor this deal closely and keep you all updated.

regards,

James,

 car hire USA

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