FTC Squeeze Hertz One Last Time Before Confirming Dollar Deal

Hi all,

So the FTC have finally given the green light for Hertz to complete its buyout of Dtag (Dollar Thrifty). The deal which I’ve been writing about for close to 2 years received FTC approval with a vote of 4-1 on Friday and mean’s Hertz will now become the second largest USA car hire company.

However the FTC who were rightly concerned about restriction of  competition  in the U.S. have asked for a few compromises before agreeing to the deal.

Advantage Rent A Car Sale

The main compromise was the sale of Hertz’s value product; Advantage Rent A Car to the organisation who currently own U-Save Car Rental and Rent A Wreck for  $16 million, half the sum that Hertz originally paid for it.

Although the diluting of one of Hertz’s brands was seen as a positive step, doubters still believed that this wasn’t going far enough, the main reason being cited was “can the Franchise Services of North America, Inc. (FSNA) compete with the likes of Avis/Budget and Enterprise?”

Airport Locations

Well no, they can’t really and one of the reasons is getting hold of airport locations. The FTC were also concerned that the Hertz Dollar deal would impact airports hugely with Hertz at some locations being represented by 3 well known brands.

So part of the agreement has seen Hertz agree to give up some of their prime airport locations  I was originally told it would be 15 or 16 locations but reports have now confirmed that Hertz  have agreed to give up 29 Dollar Thrifty locations.

16 of these airport locations will be sold to FSNA the other 13 locations will be sold to another party to be determined before the deal is finalised.

FTC Chairman Jon Leibowitz said.

American consumers rent more than 50 million vehicles at airports nationwide each year, spending $11 billion, so this is a real pocketbook issue for everyday people. Today’s bipartisan action by the FTC will ensure that consumers are not forced to pay higher prices for rental cars when they travel.

As I have mentioned before the deal has concerned many as the car rental market alters from 4 competing firms to 3 with no other supplier really armed to even compete on an even scale.

Commissioner J. Thomas Rosch the only FTC member to vote no explained

I voted against acceptance of the consent decree because I found it inadequate to resolve the competitive concerns at several dozen other airports affected by the transaction. I would have instead voted to challenge the transaction because of the significant risk of post-merger coordinated interaction among the remaining competitors.

usrentacar.co.uk facebook community also felt the deal was problematic and voted narrowly against the deal in our online poll.

I guess only time will tell as the proposed deal is open to public comment until the 17th December.

What do you think?

regards,

James

 car hire USA

Deja Vu In The Hertz And Dollar Rent A Car Deal

Hi all,

Its with a dreaded feeling of deja vu that I write this post, its over 3 months since I last spoke about the proposed Hertz/Advantage/Dollar/Thrifty takeover, sale thingy and still nothings really happened.

On the 1st August Hertz and DTAG (Dollar and Thrifty) released their quarterly reports, nothing odd about that and both companies had very good quarters. Dollar  reported a net income for the 2012 second quarter of $49.4 million, compared to net income of $42.5 million for the second quarter of 2011. The company also reported Corporate Adjusted EBITDA for the second quarter of 2012 of $88.3 million, up from $81.2 million in the second quarter of 2011. Hertz meanwhile reported second quarter 2012 worldwide revenues of $2.2 billion, an increase of 7.4% year-over-year. Both companies taking full advantage of a very buoyant second hand car market.

The part that was missing in both their second quarter market calls was any proper mention of firstly; the continued process of the merger between Hertz and Dtag and secondly; the proposed sale of Advantage Rent A Car (Hertz’s economy brand).

In their first quarter report Hertz mentioned they had been in talks with a potential buyer of Advantage Rent A Car, thought to be U-Save Car Rental but not confirmed. Rumour also had it that the sale would move forward very quickly but since then nothing seems to have happened… Could the deal of gone cold?

Hertz did state

Hertz remains engaged with the FTC to secure antitrust clearance to potentially acquire Dollar Thrifty, which requires, among other things, the divestiture of our Advantage business.

However Dollar’s CEO Scott Thompson according to popular blog auto rental news,

expressed unusual candor – and exasperation. Aside from joking about his hair loss over the issue, he said the company has lost employees and has been negatively impacted when negotiating with strategic partners. He said no offer has been extended, and called for an end to this three-year-long saga.

So we look no closer to an end to the on off saga, but I will of course keep you updated if anything else arises.

regards,

James

 car hire USA

Are Hertz Closer To Buying Dollar Thrifty Than We Thought?

Hi all,

Amazing!! Two days in a row and I’m not talking about the redesign, so you know something must have caught my attention…and it has…

Yesterday we spoke about the Hertz quarter 1 results and the effect they could have on future inbound business, well buried within the full report which can be viewed here were some very direct wording in regards to Hertz’s marathon pursuit of Dollar Rent A Car

Within the forward statement to investors was this little nugget

Among other items, such factors could include: our ability to obtain regulatory approval for and to consummate an acquisition of Dollar Thrifty Automotive Group; the risk that expected synergies, operational efficiencies and cost savings from a Dollar Thrifty acquisition may not be fully realized or realized within the expected time frame; the operational and profitability impact of divestitures that may be required to be undertaken to secure regulatory approval for an acquisition of Dollar Thrifty;

So Hertz are stating to investors that the acquisition of Dollar Thrifty could have an impact on their 2012 profit as they slimline the organisation, also looking at the report you can see a substantial amount has been spent on Acquisition related costs.

So popping on my deerstalker, I’m going to assume the following

  • Hertz will shortly announce an agreement with the FTC regarding the purchase of Dollar Thrifty.
  • We will see a fresh Hertz bid for Dollar Thrifty this quarter.
  • Hertz have found a buyer for Advantage Rent A Car (their value brand).

Now I’m no Sherlock Holmes but I’m pretty confident when I say Dollar Thrifty will become part of Hertz this year and I’m going to take a guess that either Sixt Rent A Car or Fox Rent A Car will be the new owners of Advantage Rent A Car.

What do you think?

regards,

James,

 car hire USA

Avis Budget’s Response To Hertz’s Comments Over Dollar Thrifty


Hi all,

Interesting statement from Avis Budget today -

Hertz has today stated that if the Dollar Thrifty stockholders reject the Hertz merger, Hertz will end all efforts to acquire Dollar Thrifty.  Based on this commitment, Avis Budget is now prepared to agree to pay a reverse termination fee of $20 million in a merger agreement with Dollar Thrifty.  Avis Budget has always said that as long as Hertz had matching rights, Avis Budget would not consider a reverse termination fee.  Now that Hertz has in effect eliminated those matching rights, Avis Budget is prepared to offer such fee.
 
If Dollar Thrifty stockholders do not approve the Hertz transaction at the special meeting tomorrow:
 
1. Avis Budget will continue to actively pursue the acquisition of Dollar Thrifty, including commencing an exchange offer at our recent offer price no later than 10 business days after the meeting.  Such offer will be subject only to the conditions in the merger agreement previously provided (as adjusted for an exchange offer structure with a minimum tender condition, for modification of credit agreements, and to assure that Hertz honors the commitments made in its statement earlier today) and the Dollar Thrifty disclosure schedules previously delivered to us.
2. Avis Budget will continue to actively pursue antitrust clearance.  As previously disclosed, Avis Budget has committed to sell assets representing $325 million of revenues (of which not more than $250 million are U.S.), demonstrating our commitment to attaining antitrust approval.
3. Avis Budget will commit to sign the merger agreement previously provided, with an additional provision to assure that Hertz honors the commitments made in its statement.
4. In light of continuing questions related to reverse termination fees, Avis Budget will agree to pay a $20 million reverse termination fee in the merger agreement with Dollar Thrifty.

Who will win the battle…

regards,

James

 car hire USA


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