Dollar Thrifty Automotive Group Inc.'s board said late Sunday that it accepted Hertz Global Holdings Inc.'s new $50-per-share offer up from the $41 it offered in April and amended the companies' merger agreement. The offer was made in an attempt to thwart a rival $1.3 billion cash-and-stock counteroffer by Avis Budget Group Inc., which raised the cash portion of its bid earlier this month.
Dollar Thrifty's stock climbed $1.74, or 3.6 percent, to $49.75 in early Monday trading, while shares of Hertz gained 71 cents, or 7.1 percent, to $10.76. Avis' stock rose 27 cents, or 2.6 percent, to $10.49.
The transaction would give Hertz a third more sites around the globe, raising its total to 9,800. Hertz is already the world's largest car rental company by locations, so its pursuit of the deal is rooted mostly in its desire to pump up its leisure segment with the Dollar and Thrifty brands.
Hertz, which had revenue of $7.1 billion last year, is roughly evenly split between business and vacation travelers, while Dollar Thrifty's customers are mostly vacationers looking for cheap rentals. Dollar Thrifty had revenue of $1.55 billion.
Hertz's new offer gives Dollar's stockholders $43.60 in cash for each share they own, which is $10.80 higher than the prior offer. Shareholders will also receive 0.6366 of a share of Hertz common stock and approximately $6.87 per share to be paid by Dollar Thrifty as a special cash dividend immediately prior to the acquisition's completion.
A $44.6 million reverse breakup fee is still in place and Hertz said it has started the process of selling Advantage Rent-a-Car to ensure the deal closes quickly. Hertz Chairman and CEO Mark Frissora said in a statement that the Park Ridge, N.J., company has already received interest in Advantage from "several unsolicited parties."
Some Dollar shareholders had protested the board's rejection of the Avis offer, but Dollar Thrifty has said that the Avis proposal did not include deal protection measures or adequately address antitrust concerns. Parsippany, N.J.-based Avis had offered a deal valued at more than $47 per share, but without the breakup fee that Hertz agreed to pay if it fails to complete its acquisition.
Dollar Thrifty has also suggested that Avis runs a higher risk of not winning antitrust clearance for the deal because its Budget Rent A Car division and Dollar Thrifty have similar market shares of airport car rentals aimed at leisure travelers, while Hertz's Advantage Rent A Car has only a tiny slice of that market.
A spokesman for Avis couldn't immediately be reached Monday.
The Dollar Thrifty transaction will not only help Hertz in its rivalry with Avis, but will strengthen its position against Enterprise Holdings Inc. as well. Enterprise has 7,600 Enterprise, Alamo and National sites and took in $12.9 billion in revenue in 2009.
The Hertz-Dollar Thrifty deal is just the latest in nearly a decade of consolidation in the car rental industry. In 2002, Avis' parent company bought Budget, while Enterprise's parent company acquired Alamo and National in 2007.
Dollar Thrifty, of Tulsa, Okla., was supposed to hold a special shareholders meeting to vote on Hertz's proposal on Thursday, but pushed the meeting back to Sept. 30 to give time to assess the new bid. If the proposed transaction goes through, Dollar Thrifty will become a wholly owned unit of Hertz.
Hertz previously said that the acquisition would add to its profits immediately. The company has already identified at least $180 million in potential cost cuts from combining the two businesses.