Hertz Gets Nod For Dollar Thrifty Takeover

November 16, 2012

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Hertz won approval from US antitrust regulators for its USD$2.56 billion bid for smaller car rental rival Dollar Thrifty, bringing an end to a more than two-year long takeover saga.

Hertz agreed to divest 13 additional airport locations than it had originally proposed in order to get the go-ahead from the Federal Trade Commission, which voted 4-1 for the deal.

Hertz, which had initially proposed to sell 16 locations, will divest a total of 29 on-airport Dollar Thrifty locations, under the terms of the settlement.

It will also sell its Advantage brand, which competes with Dollar Thrifty in the low-cost segment of the market, to Franchise Services of North America and Macquarie Capital.

The deal, as it was originally proposed, would have harmed competition at 72 US airports by reducing competition and giving the combined company a free reign to increase rental car rates, the FTC said.

"American consumers rent more than 50 million vehicles at airports nationwide each year, spending USD$11 billion, so this is a real pocketbook issue for everyday people," FTC chairman Jon Leibowitz said.

The Dollar Thrifty acquisition will firmly secure Hertz's number two position in the USD$22 billion US car rental industry, ahead of Avis Budget. Privately held Enterprise Holdings is the biggest player.


Antitrust issues have clouded the takeover of Dollar Thrifty, as a buyout would leave only three players with more than 95 percent of the US car rental market.

The merger -- which was announced in August -- ends more than two years of on-off takeover talks for Dollar Thrifty involving Hertz and Avis that began in April 2010.

Hertz was always seen the more likely to win regulatory clearance because it serves the high-end business rental market.

Past takeover talks were stalled in part by price and in part by uncertainty over the companies' ability to win antitrust approval of a merger.

Commissioner Thomas Rosch, who voted against the settlement, said he found it inadequate to resolve the competitive concerns at several dozen other airports.

Hertz has a 26 percent market share in the US airport market, while Dollar Thrifty has a 12 percent share, according to the FTC.

The settlement will enable Advantage to become the fourth-largest US car rental company, and allow it to compete effectively, the regulator said.

Dollar Thrifty, considered the last big prize in the industry, has always been an attractive target for US and European rivals due to its low-cost brands. At one point during the financial downturn, Hertz offered USD$2 per share for Dollar Thrifty.

It is now paying USD$87.50 per share.

Hertz's tender offer for Dollar Thrifty shares are set to expire on Friday, unless further extended.