Skift Take
The merger of the business traveler car rental brand withe the leisure-weekend car rental brand will be keenly followed as the macro trends favor the merger of the two historically distinct markets.
Three weeks after Hertz Global Holdings Inc. completed its $87.50-a-share $2.3 billion acquisition of Tulsa’s Dollar Thrifty Automotive Group Inc., the process of integrating the two companies has begun, company executives said.
Teams comprised of equal numbers of Hertz and Dollar Thrifty employees are examining the best and most efficient ways to combine eight divisions of the two companies over the next six months, officials said.
“We’re making sure there is a lead for each area — operations, fleet, IT (information technology), marketing and sales, finance, communications, HR (human resources) and legal,” said Hertz spokesman Richard Broome.
Another team of Hertz properties and real estate executives is evaluating Dollar Thrifty’s three company-owned buildings at 5310 E. 31st St. against Hertz’s owned and leased facilities in Oklahoma City, where the Park Ridge, N.J.-based rental car firm has a regional operations center employing 1,700 people.
Hertz employs 24,000 people companywide compared with Dollar Thrifty’s 6,000 employees.
“The properties and facilities people are looking at … the economics, talking about the best way to operate and attract good people,” Broome said.
When Hertz, the nation’s second largest rental car company to leader Enterprise Rent A Car, began publicly competing two years ago with third-ranked Avis Budget Group for fourth-ranked Dollar Thrifty, Tulsa civic leaders and Dollar Thrifty employees were concerned.
Avis Budget has operations in Tulsa, officials said, and a Dollar Thrifty acquisition logically could mean an expansion, rather than a reduced presence, in Tulsa.
The opposite effect was feared as the result of a Hertz takeover because of its established operations in Oklahoma City, city and Dollar Thrifty officials said.
But Hertz hasn’t announced plans to reduce operations in Tulsa, where Dollar Thrifty employs 780 people, or at either of its Dollar Rent A Car and Thrifty Car Rental brands, Broome said.
“Our plan is to be buying more cars,” Broome said. “Our plan is to expand all three brands. Right now, in the U.S., we have — combined — 450,000 cars. They (Dollar Thrifty) have a little more than 100,000. We have a little less than 350,000.”
Hertz expects the Dollar Thrifty acquisition will produce $160 million a year in cost synergies and sales growth opportunities.
The addition of the Dollar and Thrifty brands and their strength in the mid-tier leisure value segment of the rental car market complements Hertz’s leadership in the premium corporate and leisure markets, analysts said.
“We look for the acquisition of DTG to strengthen HTZ’s longer term competitive position,” Evan Mann at corporate bond analyst Gimme Credit said Wednesday. “Although this transaction increases leverage over the near term, it should only delay the company’s “ultimate goal” of achieving investment grade ratings.”
Mann said Hertz should continue to outperform the rental car industry as a whole.
Hertz executives said decisions involving integration of Dollar Thrifty are expected to be made in 90 to 180 days, the later time frame for major issues involving facilities, staffing, operations and fleet.
“It’s going to take a little while to move through those so you can get the combined companies growing like you want them to,” Broome said.
But the complementary nature of the merging of Hertz and Dollar Thrifty is evident, the Hertz executive said.
“The process of fleet sharing has already begun,” Broome said. “Hertz is business travel heavy in the middle of the week. Dollar Thrifty is heavy on weekends with the leisure market. Fleet sharing tends to be more day-of-the-week. It is situational as well — a business convention in Charlotte, for instance, and next week it could be in Pittsburgh or Dallas.”
On the leisure side, the Dollar and Thrifty brands will make Hertz a stronger global competitor with a full range of rental options, Hertz executives said.
“In the past, there may have been a customer who might not want to pay the (Hertz) price,” Broome said. “Now we have a great opportunity to keep that customer in the family.”
Hertz shares closed Thursday at $16.01, up 14 cents, and 63 cents below its 52-week high of $16.64. More than 8.79 million shares were traded, 54 percent more than its average daily volume of 5.7 million shares.
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Merging Dollar Thrifty Automotive Group Inc. and Hertz Global Holdings Inc.
Integration time frame: 90 days to 180 days
Joint integration teams: Operations, Fleet, Information Technology, Marketing & Sales, Finance, Communications, Human Resources, Legal, Properties & Facilities
Dollar Thrifty
Corporate offices: Tulsa
Employees: 6,000 in North America, 780 in Tulsa
Locations: 280 corporate in North America, 1,300 franchises in 82 countries
2011 revenue: $1.5 billion (60 percent Dollar/40 percent Thrifty)
Top three original equipment manufacturers: Ford, Chrysler, General Motors
Market niche: Mid-tier leisure value
Hertz
Corporate offices: Park Ridge, N.J.
Employees: 24,000 worldwide, 1,700 in Oklahoma City
Locations: 8,750 worldwide, 3,900 in the United States
2011 revenue: $7.1 billion
Top three original equipment manufacturers: General Motors, Nissan, Toyota
Market niche: Premium corporate and leisure
Sources: Securities and Exchange Commission, Dollar Thrifty Automotive Group Inc., Hertz Global Holdings Inc.
D.R. Stewart 918-581-8451
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