After three years of negotiations, Hertz Global Holdings, Inc. (NYSE: HTZ) and Dollar Thrifty Automotive Group, Inc. (NYSE: DTG) have entered into a definitive merger agreement under which Hertz would acquire Dollar Thrifty for $87.50 per share in cash in a transaction valued at a corporate enterprise value of approximately $2.3 billion.
The combination of Hertz and Dollar Thrifty will create a global, multi-brand rental car leader offering customers a full range of rental options through its strong premium and value brands, Hertz said. The boards of directors of both companies have unanimously approved the transaction.
Hertz also said it has reached an agreement to sell the Advantage business to Franchise Services of North America ("FSNA") and Macquarie Capital. FSNA is an rental car operator with subsidiaries including, among others, U-Save, Rent-a-Wreck, Practicar and X Press Rent-a-Car. The closing of that divestiture is conditioned upon, among other things, Hertz completing an acquisition of Dollar Thrifty, Hertz said.
Hertz Chairman and Chief Executive Officer, Mark P. Frissora said: "We are pleased to have finally reached an agreement with Dollar Thrifty after a lengthy – but worthwhile – pursuit. We have always believed that a combination with Dollar Thrifty is the best strategic option for both companies. The transaction provides Hertz instant scale with two new, well-established brands with airport concession infrastructure in the mid-tier value segment. We'll be a stronger global competitive player with a full range of rental options not only in the U.S. but in Europe and other markets given Dollar Thrifty's strong international presence. In addition, we look forward to moving efficiently and swiftly through the regulatory process having reached an agreement to divest our Advantage brand."
"Hertz has made a compelling offer to our stockholders that reflects the strength of our business and our team. Hertz is the logical partner for us with the resources to expand our value focused leisure brands in key car rental markets around the world," said Scott Thompson, President, CEO and Chairman of the Board of Dollar Thrifty. "After three years of merger-related activity and speculation, I am pleased that we have reached a win-win transaction for both Hertz and Dollar Thrifty."
The combination provides Hertz with multiple strategic options to address both corporate and leisure business in all three tiers of the car rental market, Hertz said. The combined company would have enhanced leadership positions in key markets around the world, with combined June 30, 2012 LTM sales of $10.2 billion and EBITDA of approximately $1.8 billion across approximately 10,000 locations globally. Moreover, the transaction creates significant growth opportunities, allowing Hertz to aggressively pursue mid-tier value and premium markets with dedicated brands, and compete even more effectively with its multi-brand peers.
Hertz said the combination is expected to create significant synergy opportunities, including higher productivity and efficiency from shared assets, the elimination of duplicate functions and better deals from suppliers. The company anticipates at least $160 million of annual cost synergies from the transaction, with additional sales growth opportunities.
The transaction has been structured as a two-step acquisition including a cash tender offer for all outstanding shares of Dollar Thrifty common stock followed by a cash merger in which Hertz would acquire any remaining outstanding shares of Dollar Thrifty common stock. The transaction is subject to the tender of at least a majority of the shares of Dollar Thrifty common stock, as well as other customary closing conditions. The successful completion of the transaction is also subject to regulatory clearance by the Federal Trade Commission. Hertz has remained closely engaged with the Federal Trade Commission (FTC) to secure antitrust clearance for the proposed transaction and Dollar Thrifty will fully cooperate in the process.
Lazard, Barclays, Bank of America Merrill Lynch and Deutsche Bank are acting as financial advisors to Hertz. Barclays will serve as dealer manager for the tender offer. Barclays, Bank of America Merrill Lynch and Deutsche Bank will provide financing for the transaction. Cravath, Swaine & Moore LLP, Debevoise & Plimpton LLP and Jones Day are acting as legal advisors to Hertz.
J.P. Morgan and Goldman, Sachs & Co. are acting as financial advisors to Dollar Thrifty. Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor to Dollar Thrifty.