It's good that the FTC is taking its time reviewing Hertz's acquisition of Dollar Thrifty. Consolidation has already harmed competition, and there are lots of moving pieces given the Advantage divestiture.
“We feel great that this thing is a pending announcement,” Chief Executive Officer Mark Frissora said in an interview today. “I can’t predict what the government is going to do, but we feel really good about things.”
The U.S. Federal Trade Commission pushed Park Ridge, New Jersey-based Hertz to sell the Advantage car-rental brand and 29 additional airport locations as a condition of acquiring Dollar Thrifty to create a competitor strong enough to keep Hertz, Avis Budget Group Inc. and closely held market leader Enterprise Holdings Inc. from having too much market power.
The FTC is weighing Advantage’s strength and viability under its new ownership, people familiar with the matter have said. Hertz sold Advantage to Macquarie Group Ltd.’s private-equity arm in a joint venture with Franchise Services of North America Inc. under a consent agreement with the FTC.
Under normal circumstances, the FTC would have approved the consent decree in December following a 30-day comment period.
Hertz rose 2.3 percent to $24.04 at the close in New York. The shares have surged 48 percent this year, compared with a 12 percent gain for the Russell 1000 Index.
The FTC’s investigation has focused on whether Macquarie was following through on commitments to expand and strengthen Advantage after the Dec. 7 ouster of Sanford Miller, an industry veteran who was hired to run the brand, two people familiar with the matter said in April. Macquarie had said in an e-mail to Miller last July that it didn’t have car-rental experience.
Richard Branson’s Virgin Group Ltd., the travel and entertainment conglomerate, has also signaled its interest in Advantage, sending a letter to the FTC this month saying it wanted to enter the U.S. rental-car business by buying the rental-car assets Hertz was ordered to divest.
“There’s been nothing else that has happened regardless of what the headlines have been,” Frissora said today. “A lot of it is noise and the noise is propagated by people who are trying to screw the deal up any way they can.”
Hertz acquired Dollar Thrifty to secure its position as second-largest U.S. rental-car company behind Enterprise. FTC staff recommended that the commission approve the Hertz-Dollar Thrifty consent decree, one of the people familiar with the agency’s investigation has said.
Hertz and Avis this year have reported price increases at a rate not seen since the recession as Hertz has awaited final FTC approval of its Dollar Thrifty deal.
Avis has “continued to aggressively implement pricing increases in North America,” Chief Financial Officer David Wyshner said June 4 at an investment conference. The company raised prices six times in the first quarter and attributed it in part to Hertz’s deal for Dollar Thrifty. Avis boosted prices two more times this month.
With assistance from Sara Forden in Washington. Editors: Bill Koenig, James Callan. To contact the reporter on this story: Mark Clothier in Southfield, Michigan at [email protected]. To contact the editor responsible for this story: Jamie Butters at [email protected]
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