The bidding
war for Dollar Thrifty Automotive Group started anew on Monday, as Hertz
proposed to acquire the car rental company for more than $2 billion, or $72 per
share in cash and stock. Hertz claimed its offer represents "a 24 percent
premium to the value of the entirely hypothetical price announced by Avis Budget Group over seven months ago."
Avis Budget has been awaiting Federal Trade Commission clearance before
extending to Dollar Thrifty a firm acquisition offer.
"Avis
has never put its money where its mouth is in terms of making a concrete offer
for DTG," Hertz CEO Mark Frissora said Monday during a conference call
with investors and media. "Avis seems unwilling or unable to obtain FTC
clearance, having now spent an entire year in the FTC, with nothing to show for
its efforts except legal fees and missed deadlines."
Frissora
added that a Dollar Thrifty acquisition would help Hertz better compete for
corporate business. Hertz's Advantage brand, he explained, "is too
low-price to be on the same rate card with Hertz with a corporate
customer, so this fills in the middle for us."
Dollar
Thrifty in a statement noted that its board of directors would review Hertz's
offer.
"Hertz
has essentially triggered the bidding war all over again for Dollar
Thrifty," MKM Partners analyst Keith Moore told investors on Monday during
an MKM conference call.
"There's
a sense that Avis are getting closer to getting a transaction done, and therefore
[Hertz] needs to put themselves on the clock and get the process going,"
added MKM analyst Chris Agnew. "Back in November, I think they genuinely
thought that there was a good chance Avis Budget would not get a deal done. I
think the right strategy was to step away and wait and see."
After Hertz
last spring reached an agreement to acquire Dollar Thrifty for about $1.2
billion, Avis Budget followed with a counteroffer, provoking a bidding war.
Hertz last fall made what it called its final offer at $50.25 per share, which
Avis Budget later topped at $53 per share. Dollar Thrifty's board recommended
the Hertz deal, and analysts said it made more sense and had a better shot of
federal antitrust clearance since Hertz has no large, established midprice
brand. Avis, of course, has Budget.
MKM's Moore highlighted a new wrinkle. Hertz last year included language in its
Dollar Thrifty merger agreement "that allowed them to have the last word
on any bid." This time, Moore said, "there are no restrictions on
anyone, so it's basically a much fairer situation, especially if you're a
Dollar Thrifty shareholder."
Analysts expect FTC approval for either company's bid to come with strings
attached, most likely divestitures or carve-outs that would dictate how high
the bidding for Dollar Thrifty will go. "DTG is a highly strategic, highly
accretive transaction in our view to both parties, who are very interested and
very engaged in this process," Agnew said.
In a letter
to Dollar Thrifty president and CEO Scott Thompson, Frissora claimed his company's proposal "delivers a high degree of closing
certainty. We are engaged in discussions with the Federal Trade Commission and
have started a process for the divestiture of our Advantage brand. We are highly
confident that we will obtain FTC clearance for the transaction and are
committed to a fast path forward."
Frissora said the "goal is to close this deal as quickly as
possible," possibly as soon as the third quarter if the deal receives
Dollar Thrifty shareholder approval and passes regulatory muster.
Avis Budget declined
to comment on Hertz's latest move, but CEO Ron Nelson last week told investors
and media during the company's first-quarter earnings call that the company
continues "to work closely with DTG and their counsel in order to obtain
antitrust clearance for our proposed transaction, and we continue to have a
good, constructive dialogue with FTC. In short, while the acquisition of Dollar
Thrifty is an important objective for us, we have also been taking significant
steps to manage organic growth and profitability."