Thursday, 20 October 2011 16:23

Dollar Thrifty Halts Sale Process, Hertz Still Interested in Acquisition

Car rental firm Hertz Global Holdings still wants to buy Dollar Thrifty Automotive Group, despite missing a deadline to make a final offer, and is chasing antitrust approval for a takeover of its smaller rival, according to Reuters.

On October 11, Dollar Thrifty said it failed by end-October 10 to flush out any final takeover bids that met antitrust concerns, and planned to go ahead as a stand-alone company.

However, Dollar Thrifty, which has been at the center of an 18-month tug-of-war between Hertz and rival Avis Budget, said it would consider any changes to Hertz’s offer or any other offer that might be made.

“We remain interested in acquiring Dollar Thrifty. We remain focused on receiving an FTC consent decree,” Hertz spokesman Richard Broome told Reuters, referring to the Federal Trade Commission. “That’s the first step in the process.”

Dollar Thrifty is seen as the last big prize in an industry that has consolidated in recent years, but its takeover has been uncertain as this would leave three players dominating more than 90 percent of a U.S. car rental market worth close to $21 billion in 2010. The market leader is privately-held Enterprise.

One of Dollar Thrifty’s biggest shareholders said it was highly likely Hertz would win antitrust approval and would push to get a deal through early. The shareholder asked not to be identified due to the sensitivity of the issue.

He noted that Avis, which dropped out of the bidding last month citing volatile debt markets and its recent $1 billion acquisition of its European arm, has the potential to return to the bidding fray in a few months when it has paid down its debt.

Dollar Thrifty had come up with October 10’s deadline as it sought to speed up the bidding race between Hertz and Avis, but the ultimatum lost its edge once Avis withdrew, he said.

In August, Dollar Thrifty CEO Scott Thompson said the long-pending deal had kept the company from moving forward on growth initiatives and, last month, he wrote to both Avis and Hertz asking for their final written proposals by October 10.

Dollar Thrifty decided that continuing the sale process—with uncertainty still over regulatory approval—would be costly and time-consuming, said a person close to the situation, who was not authorized to speak to the media.

Hertz has a tender offer open to Dollar Thrifty shareholders that values the company at around $1.92 billion.

Thompson said his counterpart at Hertz called him on October 7 to reaffirm the company’s commitment to pursuing a deal. “... the fact remains that they have not made a proposal that addresses our board’s requirements,” Thompson said.

Hertz was always seen as more likely to win regulatory clearance as it serves the high-end market, and is already in the process of selling its low-cost Advantage brand.

But Hertz will have to raise its $66.21 per share offer to somewhere in the region of $75 a share, the Dollar Thrifty shareholder said.

Tulsa, Oklahoma-based Dollar Thrifty reiterated its third-quarter outlook, and said it would soon start a $400 million share buyback program, buying back around $100 million worth of shares per quarter over the next four quarters.

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