--FTC approves Hertz's $2.3 billion bid to acquire smaller rival
Dollar Thrifty
--Agreement will allow the No. 2 and No. 4 car-rental firms by
fleet size to merge
--Agency's approval is one of last steps needed to end long
Dollar Thrifty takeover saga, which began in April 2010
The U.S. Federal Trade Commission has approved Hertz Global
Holdings Inc.'s (HTZ) $2.3 billion bid to buy smaller rival Dollar
Thrifty Automotive Group Inc. (DTG), clearing the way for them to
complete the deal this year.
The agreement will allow Hertz, the No. 2 domestic car-rental
company by fleet size, to pay $87.50 a share in cash to buy Dollar
Thrifty, the No. 4 player in the category. Hertz is required to
divest its Advantage brand, as well as some U.S. airport locations
and other assets, following the closing of the Dollar Thrifty
transaction.
The takeover saga for Dollar Thrifty began in April 2010 when
Hertz offered to pay $1.2 billion. A bidding war ensued when Avis
Budget Group Inc. (CAR) unveiled a higher offer, though Avis
eventually ended its pursuit of Dollar Thrifty in September due to
market volatility and to focus on a roughly $1 billion acquisition
of Avis Europe PLC.
Though Hertz withdrew in October 2011 its sweetened $2.2 billion
bid to acquire Dollar Thrifty, the company maintained it was
interested in eventually buying the smaller rival after obtaining
FTC approval. After months of speculation, Hertz launched a new
offer to buy Dollar Thrifty in late August.
Observers were certain a deal between the firms would eventually
win approval, though they said Hertz would need to divest the
Advantage brand and other assets. The U.S. car-rental industry will
now have three major players--Hertz, Avis and privately held
Enterprise Holdings Inc.--down from nine a decade ago.
The Wall Street Journal reported Hertz's negotiations with the
FTC were an intense process in which some people at the commission
voiced demands for more concessions than the car-rental companies
had anticipated. Hertz said Thursday it hopes to be able to
continue operating both the Dollar and Thrifty brands at a number
of the airport locations it is giving up to a third-party
operator.
The FTC said Hertz has agreed to sell all of the Advantage brand
and 16 Dollar Thrifty on-airport locations where Advantage doesn't
yet operate to car-rental operator Franchise Services of North
America Inc. (FCHA) and advisory firm Macquarie Capital. In
addition, Hertz will sell another 13 Dollar Thrifty on-airport
locations to those parties or another FTC-approved buyer after the
deal closes.
Industry consolidation typically leads to regulatory questions
about competitiveness and consumer pricing, and the FTC was
particularly concerned about how the Hertz-Dollar Thrifty merger
would affect consumers.
Hertz argued the deal wouldn't threaten competition as the
different brands cater to a diverse set of customers. Hertz
primarily targets business travelers and customers seeking high-end
cars. Dollar targets mainly leisure travelers, while Thrifty is
more budget-oriented.
FTC Chairman Jon Leibowitz said competitive pricing was a
concern, though he said the agreement the FTC made with the
companies "will ensure that consumers are not forced to pay higher
prices for rental cars when they travel."
The FTC's vote approving the deal was 4-1, with J. Thomas Rosch
voting no. Commissioner Rosch said he didn't believe the agreement
adequately resolved the competition concerns at several dozen other
airports affected by the transaction.
With the FTC approval in Hertz's rear view mirror, the company
said the deal now awaits customary terms and conditions, including
the acquisition of a majority of Dollar Thrifty's outstanding
shares. A tender offer for Dollar Thrifty's shares is due to expire
Friday, unless further extended.
Shares of Dollar Thrifty were up 0.5% to $87.45 after hours
while Hertz was flat at $14.25.
Write to John Kell at john.kell@dowjones.com
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