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Hertz moves ahead with merger after buying the majority of Dollar Thrifty’s shares

Nov 17, 2012 12:39 pm

Skift Take

Hertz cleared the two obstacles standing in the way of a merger this week, but regulations will keep the new company from forming a monopoly in the rental car industry.

— Samantha Shankman

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Atomic Taco  / Flickr.com

Dollar Thrifty at Seattle-Tacoma Airport. Atomic Taco / Flickr.com


Hertz Global Holdings Inc. gained enough shares of stock of Tulsa-based Dollar Thrifty Automotive Group Inc. on Friday to clear the way for the completion of their $2.3 billion merger.

At the close of business on Friday, more than half of Dollar Thrifty’s 29.4 million shares of stock outstanding had been sold to Hertz, executives said.

Hertz, which had offered $87.50 a share for Dollar Thrifty in its bid to acquire the firm, declined to extend the expiration date of its tender offer past 4 p.m. Friday.

Hertz spokesman Richard Broome said the majority of Dollar Thrifty’s shares have been tendered and Hertz executives will begin discussing the transition process to a merged company next week.

“Continuity is the top priority, and Dollar Thrifty’s management team will continue to make all day-to-day decisions,” Broome said in an email message to the Tulsa World. “There will be an orderly senior leadership transition later this year.”

Hertz plans to buy the remaining shares it needs on Monday directly from Dollar Thrifty and complete the merger without a vote of shareholders, the company said in a press release.

In a decision that has been awaited by the Park Ridge, N.J.-based rental car operator for a month, the Federal Trade Commission on Thursday approved the merger of Hertz, the nation’s second leading rental car company, with Dollar Thrifty, the nation’s fourth largest rental car operator.

The FTC conditioned its approval of the merger on Hertz divesting its Advantage discount rental car brand as well as 29 Dollar Thrifty on-airport rental car locations in the United States.

Neither the FTC nor Hertz has disclosed the locations of the 29 Dollar Thrifty on-airport locations.

In a filing with the Securities and Exchange Commission on Thursday, Dollar Thrifty executives advised company employees:

  • No Dollar Thrifty field employee will be affected by rental counter divestitures until late February at the earliest.
  • Hertz’s goal is to maintain operations and keep jobs in every market where Dollar Thrifty currently has rental counters on airport, although in a few cities Dollar Thrifty may have to move off-airport temporarily to satisfy federal regulatory requirements.
  • During the divestiture process, teams who are responsible for information technology, back office, human resources, finance and operations will be notified in advance to plan for the divestiture and transition to the acquiring company.

Dollar Thrifty has 780 employees at its corporate offices at 5310 E. 31st St. and 5,900 workers in the United States. The company maintains an average fleet of 107,000 vehicles, and in 2011 reported revenue of $1.4 billion, 90 percent of which came from airport locations. Nationally, Dollar Thrifty’s market share of all airport car rentals is about 12 percent, the FTC says.

Hertz employs 24,000 people worldwide, 16,400 of them in the United States, and has an average rental vehicle fleet of 355,000. In 2011, Hertz had $3.3 billion in U.S. on-airport rental revenue. Nationally, Hertz’s market share of airport car rentals is about 26 percent, FTC documents show.

Together, Enterprise Rent-A-Car, the nation’s largest rental car operator, Hertz, Avis Budget Group (number three) and fourth-ranking Dollar Thrifty control 80 percent of the nation’s rental vehicle market, says IBISWorld Inc., which follows the industry in Santa Monica, Calif.

The FTC said the Dollar Thrifty/Hertz merger as originally proposed would have been anti-competitive. By paring major rental car competitors from four to three, the Dollar Thrifty/Hertz merger would lead to substantially more concentration in 72 U.S. airport rental car markets, the FTC said.

The FTC also said the merger as originally proposed would have eliminated head-to-head competition between Dollar Thrifty and Hertz at several big U.S. airports.

By requiring Hertz to divest its Advantage brand and the Dollar Thrifty on-airport locations, the FTC enables Advantage to become the nation’s fourth largest rental car operator and an effective on-airport competitor, the agency said.

The settlement action by the FTC “will ensure that consumers are not forced to pay higher prices for rental cars when they travel,” FTC Chairman Jon Leibowitz said.

Dollar Thrifty shares closed Friday at $87.49, up 49 cents. More than 2.6 million shares were traded, compared with an average daily volume of 1.8 million shares.

Hertz shares rose 29 cents, closing at $14.54. More than 8.8 million shares were traded versus an average daily volume of 6.13 million shares.

D.R. Stewart: 918-581-845. don.stewart@tulsaworld.com.

(c)2012 Tulsa World (Tulsa, Okla.). Visit Tulsa World (Tulsa, Okla.) at www.tulsaworld.com. Distributed by MCT Information Services

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