ANC Selling Alamo, National Brands To Investment Firm

ANC Rental Corp., the parent company of National Car Rental and Alamo Rent A Car, which is based in Fort Lauderdale, Fla., has signed an agreement to sell National and Alamo to Cerberus Capital Management LP, a private New York investment firm, for $290 million. The sale culminates the restructuring effort that ANC has undertaken since filing for bankruptcy protection in November 2001.

The sale, which ANC hopes to have approved by the U.S. Bankruptcy Court for the District of Delaware in a hearing on Aug. 6, requires Cerberus to pay $230 million in cash. The investment firm would assume $60 million in non-vehicle debt and provide $150 million in working capital. It also would assume more than $2 billion in vehicle debt, plus other current liabilities. Should the deal with Cerberus fall through, ANC would be required to pay the firm a $12.5 million breakup fee, plus up to $1.5 million in costs.

Despite ANC's restructuring efforts—a central plank was consolidating the rental counters of the Alamo and National brands at major airports—the company has continued to lose money, said Neil Abrams, president of Abrams International Consulting in Purchase, N.Y. The proposed sale "breathes new life and hope into them."

Abrams said car rental veteran William Lobeck—who was CEO of National when it was sold to Republic Industries, later renamed Autonation Inc., in early 1997 for $600 million—would be running ANC should the Cerberus purchase go through. One question is whether Lobeck eventually would spin off the Alamo brand. Another is whether he would rebuild both brands' network of neighborhood locations. Abrams said he thought ANC had made a strategic mistake in closing all of its local locations, a market that currently is strong in the industry due to the fall-off in airport business. Still, he acknowledged the necessity of management "to cut losses" at the bankrupt company. "There's a lot of work to be done in reestablishing the integrity of the systems and identity in the marketplace."

There's still a chance that a new suitor might emerge. On June 18, the bankruptcy court held a hearing to approve the formal bidding procedures, which opened the door for other qualified buyers to submit competing bids.

One possibility, Abrams said, could be the emergence of a strategic buyer representing the automotive or travel industry and fulfilling a similar role to that played by Cendant in purchasing bankrupt Budget Rent a Car in 2002.