Avis Budget Group today announced intentions to outbid Hertz for the acquisition of Dollar Thrifty Automotive Group, issuing a letter to Dollar Thrifty's chairman and CEO decrying the terms of the proposed deal with Hertz.
In the letter, Avis Budget chairman and CEO Ronald Nelson said the company wants to make "a substantially higher offer" than the $41 per share offered by Hertz last week
(BTNonline, April 26), worth about $1.2 billion. Nelson said he and Dollar Thrifty president and CEO Scott Thompson had previously scheduled a dinner meeting to discuss a potential transaction, set for two days after the deal with Hertz was announced.
"We at Avis Budget have on several occasions in the past expressed interest in entering into a transaction with Dollar Thrifty, yet at no stage in the last several months did you or your financial advisor engage us in any discussions about a transaction or offer to provide us with information so that we might submit a bid," Nelson said in the letter. "It is hard to understand how your failure to engage in discussions with an interested strategic buyer, who you know also would be able to achieve significant synergies as a result of a combination, can be consistent with the fiduciary duties that you and your board carry to seek the best possible deal for you shareholders."
Car rental consultant Neil Abrams of Abrams Consulting Group said the Dollar Thrifty board might have been leaning toward Hertz because of the prospects for future gains. The lower-priced Dollar and Thrifty brands would complement Hertz's upscale brand but would be somewhat redundant with the Budget brand, and they also would benefit from Hertz's seamless global reach, he said. The best long-term value, however, might not be the same as the best financial value to Dollar Thrifty stockholders, he said.
"The way they were explaining it, Hertz represented the best synergies and the best deal for the long-term benefit of the company," Abrams said. "This certainly puts the DTAG board under the magnifying glass of analyzing what was the basis of their decision."
An Avis Budget/Dollar Thrifty deal also might have more trouble clearing antitrust regulatory hurdles, as it would result in a slightly larger marketshare control than a Hertz/Dollar Thrifty deal, as well as the similarities between the Dollar, Thrifty and Budget brands, Abrams said. In his letter, Nelson said the company is "confident that the antitrust analysis and clearance timetable for an Avis/Dollar Thrifty transaction are comparable to those associated with a Hertz/Dollar Thrifty transaction."
Nelson also asked Dollar Thrifty to dissolve "egregious provisions" of the Hertz/Dollar Thrifty agreement, specifically a more than $40 million breakup fee should either party back out of the agreement. "Given the complete failure to conduct a pre-signing market check of the virtually no-premium deal with Hertz, such preclusive defensive measure are clearly not supportable in this situation," he said.