Hertz must do more than just dump Advantage if it wants permission to buy Dollar Thrifty.
Hertz Global Holdings (HTZ) today resumed its pursuit of smaller auto rental rival Dollar Thrifty (DTG), with a $2.1 billion offer. The bid would provide Dollar Thrifty stockholders with $72 per share, or a 3% premium to Friday’s closing price.
Hertz originally agreed to buy Dollar Thrifty in April 2010 for $1.2 billion. Soon after, privately-held Avis Budget Group said it might also have interest. Dollar Thrifty shareholders rejected the Hertz offer, thus setting off a bidding war that seemed to end last September when Avis offered a top value of $1.8 billion. But that deal remains in regulatory limbo, waiting for the FTC to give its stamp of approval.
So now Hertz is back, apparently believing that it knows the right sweet nothings to whisper into the ear of FTC boss Jon Leibowitz.
Here is how Hertz chairman and CEO Mark Frissora explained it in a press release:
“We have always known that antitrust considerations would be pivotal in any transaction with Dollar Thrifty, and that a combination of Avis Budget and Dollar Thrifty would face serious antitrust obstacles. Avis Budget has been unable to produce a viable antitrust remedy, despite an entire year of discussions with the FTC with no end in sight. In contrast, we are confident we can deliver a compelling proposal to the FTC centered around the divestiture of our Advantage brand, and are committed to working proactively to move through this process as quickly as possible.”
Am I the only one who thinks Frissora is holding something back? Divesting Advantage simply cannot be the straw that stirs the FTC’s drink. Hertz currently has over 2300 staffed U.S. locations (which is more than Avis), of which fewer than 50 are Advantage. That’s virtually a rounding error. It would be like the NY Yankees saying that they want payroll parity, and that they’ll get there by releasing Francisco Cervelli.
Here’s the equation:
Hertz-Advantage+Dollar Thrifty > Avis+Dollar Thrifty.
Hertz either must be willing to also give up something else, or it thinks that Avis has somehow mismanaged its negotiations. Or am I missing something? Other than chutzpah, of course…