Magazine for the professional car and truck rental industry.
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RENT ALERT BY JOANNE TUCKER For updates, visit www.AutoRentalNews.com MERGERS SET TO ALTER RENTAL LANDSCAPE Hertz and Dollar Thrifty entered a merger agreement over the third quarter, while Hertz's Advantage Rent-A- Car brand is set to be divested to Franchise Services of North America. A A BIG SHIFT IN THE INDUSTRY'S MARKET SHARE MAY BE UNDERWAY AFTER Hertz and Dollar Thrifty Automotive Group announced Aug. 27 that they have entered into a defi nitive merger agreement. In a transaction valued at about $2.3 billion, Hertz's cash tender offer under the agreement would buy Dollar Thrifty for $87.50 per share. The two brands combined would account for about 10,000 locations globally and about $10.2 billion in combined sales for the 12-month period leading up to June 30, 2012, the companies reported. The boards of directors from both companies have given unanimous approval of the deal and are recommending that shareholders approve the transaction. As of this writing, the shareholders had not yet voted on the deal. "The transaction provides Hertz instant scale with two new, well-established brands with airport concession infrastructure in the mid-tier value segment," said Mark Frissora, Hertz chairman and CEO, at the conference call when the deal was announced. "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." Frissora also said on the call that Hertz would position Thrifty as a "Spartan brand" and would expand Thrifty in Europe. "Hertz is the logical partner for us with the resources to ex- pand our value-focused leisure brands in key car rental markets around the world," said Scott Thompson, president, CEO and chairman of the board for 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." On Sept. 25, Dollar Thrifty announced that the "go shop" period — in which another company could offer a competing bid for Dollar Thrifty — had ended, and that no third party had submitted a proposal during the "go shop" window. Hertz announced Oct. 18 that it agreed to extend the terms of its timing agreement with the Federal Trade Commission (FTC) until Nov. 16, 2012. Originally, the FTC said that it would complete the review of the merger by Oct. 30. "Hertz and Dol- lar Thrifty will continue to assist the FTC in its review of the relevant information and are continuing to work with the FTC to address matters raised by the Commissioners and the staff," 32 November/December 2012 AUTO RENTAL NEWS Hertz said in the extension announcement. "There can be no as- surance as to what actions the FTC may take in connection with the proposed acquisition." In order to win regulatory approval, Hertz said that it would divest "certain additional assets and DTG airport concessions." One of those assets is the company's Advantage Rent-A-Car brand, though the company will retain Advantage locations in Europe, which Frissora said will be converted into Thrifty locations. FSNA MAY ACQUIRE ADVANTAGE RENT-A-CAR Franchise Services of North America (FSNA), owner of two operating subsidiaries, U-Save Auto Rental of America Inc. and Practicar Systems Inc. — which also licenses franchises to oper- ate Rent-A-Wreck in Canada — announced Aug. 28 that it would acquire Advantage, pending the Hertz and Dollar Thrifty deal. FSNA's new partner Macquarie Capital has committed $15 million to fund the transaction in exchange for a 49.76% equity stake in FSNA. Advantage would continue to operate as an independent brand once the acquisition is completed, FSNA said. "We plan to continue the development of the brand both domestically and internationally," added Sandy Miller, co-chairman and co-CEO of FSNA. "We welcome the Advantage employees and their cus- tomers and are committed to making this a seamless transition for all." FSNA would operate Advantage from 62 locations in the U.S., which would include certain former Thrifty locations, where Advantage would operate from new in-terminal markets, accord- ing to FSNA. The acquisition would expand on FSNA's current leisure car rental presence, which consists of 28 franchised airport locations that operate under the U-Save Car & Truck Rental brand globally. "We also believe that in many instances, an opportunity will exist for our franchisees to expand their offerings, and this will mean an incremental opportunity for our insurance divisions," said Tom McDonnell, co-chairman and co-CEO of FSNA. Pursuant to the purchase agreement, FSNA said on Sept. 6 that it didn't expect to receive Advantage's fi nancial statements from Hertz until after November. As of this writing, FSNA shareholders, as well as Canada's TSX Venture Exchange, must still approve the deal.