Hertz buying Dollar Thrifty for about $2.3 billion

By Gary Stoller, USA TODAY
Updated 25m ago

Hertz is increasing its clout in an increasingly consolidated auto rental industry by buying rival Dollar Thrifty for $2.3 billion.

The deal, which Hertz confirmed today and which must be approved by the Federal Trade Commission, is expected to boost Hertz from No. 3 to No. 1 in market share at U.S. airports.

The move also will give Hertz — popular with corporate and high-end renters — a larger presence in the discount and leisure travel market.
Though the deal would reduce the number of big companies from four to three in the U.S. auto rental industry, analysts aren't predicting the acquisition will increase rental rates for consumers.

Veteran industry analyst Neil Abrams says the deal will be "unnoticeable from a consumer standpoint."

Rental car prices should not be affected, Abrams says, because there is still plenty of competition from other brands.
U.S. rental car market 2011

Company
Cars
Locations
Enterprise Holdings (Alamo, Enterprise, National)
920,861
6,187
Hertz (includes Advantage)
320,000
25,003
Avis Budget Group
285,000
2,300
Dollar Thrifty Automotive Group
118,000
445
U-Save Auto Rental System
11,500
325
Fox Rent A Car
11,000
13
Payless Car Rental System
10,000
32
ACE Rent A Car
9,000
90
Zipcar
7,400
1285
Rent-A-Wreck of America
5,500
181
Triangle Rent-A-Car
4,200
28
Affordable/Sensible
3,300
179
Independents
55,000
53,503
Source: autorentalnews.com

Betsy Snyder, a director at Standard & Poor's, says fewer competitors typically indicate higher pricing, but there "will still be substantial presence by the value car renters that that could keep a lid on pricing."

Hertz currently controls about 25% of the U.S. airport market behind Avis Budget Group, which has 26% of the market, and Enterprise Holdings, which has 34%, according to Abrams' 2011 statistics at 50 major airports.

Dollar and Thrifty control about 12% of airport market, so the acquisition — which Hertz pursued for several years — could vault the company ahead of Enterprise Holdings' three brands, Enterprise, National and Alamo, at airports.

Enterprise has a much larger off-airport presence than Hertz and would remain the largest auto rental company overall.

According to the trade publication Auto Rental News, Enterprise had nearly 921,000 vehicles in service at 6,187 U.S. locations and generated an estimated $11.1 billion in revenue last year.

Hertz and its discount Advantage Rent-A-Car brand had an estimated 320,000 vehicles in service at 2,500 U.S. locations and generated $4.2 billion in revenue.

Hertz said Sunday that, pending completion of its acquisition of Dollar Thrifty, it agreed to sell Advantage to Franchise Services of North America and Macquarie Group's Macquarie Capital for a reported $16 million.

Dollar Thrifty Automotive Group had 118,000 vehicles in service at 445 U.S. locations and generated $1.6 billion in revenue.

Monday's announcement of the deal comes amid a series of back and forths between Hertz and Dollar Thrifty that started in 2010. Avis Budget Group was also in the mix, pursuing a bid for Dollar Thrifty for more than a year.

Avis dropped its bid nearly a year ago citing market conditions. Then, in October last year, Hertz dropped its bid, too. But Dollar Thrifty didn't trust that the years of attempts were over. In February, it extended its shareholder rights plan known as a "poison pill" — a maneuver designed to deter any unsolicited attempts to take over the company — through May 2013.

Hertz Chairman and CEO Mark Frissora said the Dollar Thrifty buyout not only gives it access to two well-known rental car brands, it makes it more competitive player in Europe and other markets overseas.

"We are pleased to have finally reached an agreement with Dollar Thrifty after a lengthy — but worthwhile —pursuit," he said.

Dollar Thrifty President, CEO and Chairman Scott Thompson said the transaction is not only compelling for its stockholders but also will help broaden its reach.

"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," he said.

Hertz anticipates the acquisition will result in at least $160 million in annual cost savings, with additional sales growth opportunities.

The acquisition is "a deal that would have made sense five years ago and makes sense now," says Abrams. "The two companies are very complementary."

Enterprise Holdings spokeswoman Laura Bryant and Avis Budget Group spokeswoman Alice Pereira say they have no comment about the Hertz deal.

Hertz buying Dollar Thrifty for about $2.3 billion