American car hire firm Dollar Thrifty taken over by rental firm Hertz
The parent company of Hertz Car Rental – Hertz Global Holdings inc. - is taking over American competitor Dollar Thrifty Automotive Group Inc.
The acquisition price of Dollar Thrifty and sale of Advantage
Hertz paid $87.50 per share, which equates to a total share value of 2.6 billion US Dollars for the acquisition of Dollar Thrifty. The transaction between Hertz and Dollar Thrifty is expected to be finalised mid October 2012.
Furthermore, Hertz car rental has struck a deal selling car rental brand Advantage to FSNA (Franchise Service of North America) and Macquarie Capital. Advantage car hire is being sold for 16 million Dollars. Hertz is also compelled to sell off selected Dollar Thrifty airport branches in order to comply with American competition laws.
FSNA is already the owner and parent company of the U-Save brand in America, where the present Director previously sat as Director at Budget car rental from 1997 to 2004.
Hertz CEO, Mark P. Frissora, informs that the negotiations and due diligence has been a very lengthy process, but expressed his satisfaction about an agreement between the parties finally being in place. The acquisition will strengthen market position in America and Europe in particular, where it aims to focus the Thrifty brand in the low price car hire market.
The synergy effect of the merger is expected to save Hertz in the region of $160 million annually over the next two years.
Hertz showed interest in buying Dollar Thrifty already in 2007 and in 2010 by putting in a bid of $1.2 billion for the car rental group, which was turned down. Dollar Thrifty shareholder’s patience proved worthwhile, as by 2012 the bid on Dollar Thrifty had eventually more than doubled since the initial offer.
As a result of the global credit crunch, the Dollar Thrifty value dipped to $0.62 per share in 2009, which means the shares have made an incredible 141 folds recovery over 3 years, with Hertz now paying $87.50 per share.
After Hertz’ announcement of the acquisition, Hertz share price immediately soared by 8% and has increased by more than 20% since. It‘s a clear indication that investors are generally positive about the Hertz consolidation and the anticipated synergy effect of the takeover of the two American car rental brands.
With the merger Hertz, Dollar and Thrifty will have a combined count of over 10,000 rental locations worldwide.
The Hertz – Thrifty Dollar deal is however still conditional to regulator FTC’s (Federal Trade Commission) approval of all transactions.
The largest car rental companies in America
Hertz (incl. Dollar Thrifty), Enterprise (incl. National and Alamo) and Avis Rent A Car (incl. Budget) share approximately 80% of the total car rental market in the United States. Hence, market analysts do not expect the industry competition regulators to accept further overtakings by major American car hire firms. The remaining 20% market share consists of many smaller car rental companies in the USA, where no single company currently owns more than 1% of the US market share for car rental.