NEWS
Dollar Thrifty calls for an end to Hertz’s acquisition effort
By Jerry Limone and Danny King
Final kiss-off or negotiation ploy?
That’s what some analysts are asking af-
ter Dollar Thrifty Automotive Group said
last week that it will remain a stand-alone
entity after concluding that Hertz Global
Holdings’ most recent acquisition propos-
al — valued at about $2.1 billion in early
May — was insufficient because it doesn’t
guarantee that the transaction will pass U.S.
antitrust review.
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a request for comment last week, though
Hertz spokesman Richard Broome told Reuters that the company remained interested
in acquiring Dollar Thrifty and was working with the Federal Trade Commission on
eliminating antitrust issues.
Whether this spells the end of a bidding
process that began almost 18 months ago
and what reasons might have caused the
proposed acquisition to be held up by regulators remain in question.
The acquisition of Dollar Thrifty would
boost Hertz’s share of the U.S. car-rental
market to about 28% from 20% of the
$20.6 billion industry. Enterprise would remain the industry leader at 48%, according
to Auto Rental News.
Still, with much of Enterprise’s business
coming from off-airport customers, a combined Hertz-Dollar may have a far higher
share of the airport market. Additionally,
Hertz’s Advantage Rent-A-Car may be perceived by regulators as catering to many of
the same budget-leisure customers as Dollar
Thrifty, according to Neil Abrams, principal
at Purchase, N. Y.-based Abrams Consulting
Group and a former Hertz executive.
Hertz said last year that it would try to
sell its Advantage Rent-A-Car division to
quell antitrust concerns, but still hasn’t
found a taker.
Dollar Thrifty CEO Scott
Thompson said Hertz’s offer
didn’t ‘eliminate antitrust
regulatory risk.’
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“Advantage is the largest of the lower-tier
bargain brands,” Abrams said. “If they control
Dollar Thrifty and Advantage, they’re both in
the value-leisure airport segment. That’s what
[regulators] are looking to avoid.”
Hertz initially bid on Dollar Thrifty
in April 2010 with a cash-and-stock of-
fer worth $41 a share, or about $1.17 bil-
lion. That triggered a bidding war with
Avis Budget that culminated in May with a
Hertz offer valued at $72 a share, or about
3% more than Dollar Thrifty’s stock price
at the time. Since then, Dollar Thrifty’s
stock rose to more than $83 a share before
settling at about $60 last week.
Meanwhile, last month, Dollar Thrifty
instructed Hertz and Avis Budget to submit
their best and final offers by Oct. 10. Subsequently, Avis Budget announced it was
ending its pursuit of Dollar Thrifty, instead
deciding to focus its efforts to acquire Avis
Europe.
Both Abrams and antitrust expert Robert
Lande said the prospect of a larger, stronger
company and the relatively small legal cost
compared with the $2 billion bid on the table make Dollar Thrifty’s stated reasons for
backing out questionable, and might signal
an attempt to either get Hertz to increase
its bid or speed up the acquisition process.
“Ninety-nine percent of companies in
this position just fight it out,” said Lande,
a professor at the University of Baltimore
School of Law. “If you don’t have a company
withering on the vine, then why not spend
the $10 million on lawyers and fight it out?”
16
OCTOBER 17, 2011
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