Hertz, Dollar Thrifty will be better together, CEOs say
BY D.R. STEWART World Staff Writer
Wednesday, August 29, 2012
8/29/12 at 2:35 AM
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A merger of the second- and fourth-largest U.S. rental car operators will create a $10.2 billion company whose appeal to the leisure value market will complement corporate rentals while increasing fleet-sharing and utilization, company executives say.
The CEOs of Hertz Global Holdings Inc. and Dollar Thrifty Automotive Group Inc. said the proposed $2.3 billion acquisition of Dollar Thrifty by Hertz will boost Hertz's earnings and benefit travelers and the industry.
Hertz's offer is $87.50 per share for 29.4 million shares of Dollar Thrifty stock.
"Clearly, they are buying Dollar Thrifty as a platform for growth and they will expand the brands and market share," said Dollar Thrifty President and CEO Scott Thompson. "We don't have much presence in continental Europe. Hertz's plans include expansion of our brands domestically and internationally. Hertz has a larger platform that can make that expansion easier. Also, Hertz has technology that will offer customers products and services they don't have today."
Hertz Chairman and CEO Mark Frissora said in a press conference on Monday that Hertz has a growing global car rental and equipment rental businesses. Hertz also has an experienced management team and an efficient and productive infrastructure, Frissora said.
"The addition of Dollar Thrifty, one of the market leaders in renting cars to the price-conscious leisure customers, strengthens each one of these value drivers and provides an exceptional platform for future growth," Frissora said. "It gives us established value brands, longer average rental lengths, a broad location network and a higher share of the leisure market. An increase (in) leisure rentals as a percent of revenue will support our goal of reducing operating cyclicality due to the longer length of the transaction and the greater resiliency of the leisure traveler.
"Another benefit to profit will be the fleet sharing, which will significantly increase our combined utilization especially on the weekends. Hertz's strong mid-week peak, driven by corporate rentals, will be complemented by Dollar Thrifty's weekend leisure peak demand."
Hertz, based in Park Ridge, N.J., has 24,000 employees worldwide, 1,700 of whom work at a regional reservations center in Oklahoma City.
Dollar Thrifty's corporate offices at 5310 E. 31st St. include three office towers owned debt-free by Dollar Thrifty.
"We have no information on Hertz's plans for the Tulsa operations, but my guess is that Hertz will benchmark the cost of functions in Tulsa against its Oklahoma City operations in determining where functions are located over the long term," Thompson said. "Dollar Thrifty is performing very well and Dollar Thrifty employees are performing very well, and Hertz doesn't want to make snap judgments and will do the best job they can to retain the best balance between the companies. It's good for the Tulsa work force and good for Hertz going forward."
Thompson and Frissora said Dollar Thrifty and Hertz will be operated as stand-alone companies while the Federal Trade Commission completes its antitrust review of the transaction.
Hertz expects FTC clearance by mid-October, Frissora said, and it will complete the tender offer and begin purchasing Dollar Thrifty shares in mid- to late-October. The deal is expected to close by the end of the year, he said.
Hertz representatives will be at Dollar Thrifty's corporate offices before the closing to evaluate processes and procedures, the executives said.
After the closing, executives of the human resources departments of both companies will interview Dollar Thrifty employees for positions at the combined company, officials said.
"For a four-month period after closing, the Tulsa work force will be retained and assured of their job, pay or severance," Thompson said. "The Hertz organization understands they have bought a company that is profitable at a high level and I think they will be cautious about making changes ... and don't damage the profitability of Dollar Thrifty as they work through the integration."
Over time, Thompson said he didn't regard a Hertz/Dollar Thrifty deal as inevitable.
But as Hertz continued to pursue the Tulsa company over three-plus years, Thompson said the strategic fit and synergies of the combination were compelling.
"Mark (Frissora) is a very determined individual and understands the value of Dollar Thrifty to the Hertz organization and he has been relentless in his pursuit of something he considered very important to his company," Thompson said.
Dollar Thrifty shares closed Tuesday at $87.02, down 6 cents; Hertz rose 19 cents, closing at $14.40.
Top 10 DTAG Shareholders
The top 10 shareholders
control 19.39 million Dollar
Thrifty shares, or 65.9
percent of 29.4 million
1. York Capital Management: 5.29 million shares,
2. Pentwater Capital Management
LP: 3.22 million
shares, 11.57 percent
3. Westchester Capital
Management Inc.: 2.34
million shares, 8.43 percent
4. PAR Capital Management
Inc.: 2.27 million
shares, 8.18 percent
5. Vanguard Group Inc.: 1.59 million shares, 5.72
6. BlackRock Institutional
Trust Co., N.A.: 1.38 million
shares, 4.97 percent
7. Chesapeake Partners
Management Co. Inc.: 852,260 shares, 3.06
8. Deutsche Asset
Management Americas: 848,333 shares, 3.04
9. Iridian Asset Management
LLC: 803,952 shares,
10. Scopus Asset Management
L.P.: 800,000 shares,
Source: Dollar Thrifty Automotive Group Inc.
Original Print Headline: Better together
D.R. Stewart 918-581-8451
Rental cars fill a parking garage near the Dollar Thrifty booth Monday at Tulsa International Airport. MATT BARNARD / Tulsa World