Hertz snaps up car rental rival

Hertz has bought out Dollar Thrifty in a car rental takeover worth $1.2 billion US, the company announced Monday.

New Jersey-based Hertz Global Holdings Inc., the world's biggest car rental agency, purchased Dollar Thrifty Automotive Group Inc. in a stock and cash deal worth$41 a share.

"Dollar Thrifty ...has a strong international presence, complementing our global footprint, which enables us to utilize a recognized brand to accelerate our leisure rental strategy in Europe and other markets," said MarkFrissora, Hertz's chairman and chief executive officer,announcing the friendly buyout.

The agreement also should boost Hertz's U.S. market share by approximately50 per cent.

Before the takeover, Hertz held 25.6 per cent of the American car rental sector while Dollar Thrifty, which rents automobiles under the Dollar and Thrifty banners, had a 12.9 per cent stake in the domestic market, according to an earlier company presentation to investors.

Regaining strength

Hertz'spurchase price,80 per cent of which is in cash andthe remainderin Hertz stock, represented a20 per cent premium above Dollar Thrifty's 30-day stock price. But the deal also signalsthe return of the car rental segment.

Last year, Dollar Thrifty's stock price hovered around the $2 level as the agency's sole vehicle supplier Chrysler LLC went through a bankruptcy proceeding, a situationthat left the rental company without cars for its customers.

Since that time, however, Dollar Thrifty has managed to hike revenue andimprove its financial condition to thedegree that the Tulsa, Okla.-based firm postednet earnings of $45 million in 2009 compared to a loss of $347 millionfor the previous year.

DollarThrifty posted an operating profitof nearly $100 million and said it expected toimprove that showing by 40 per cent in 2010.

Hertz also showed a substantial improvement in 2009 versus its 2008 financial results, although it posted a loss in both cases.

Hertz lost $111 million on a net basis in 2009. That was marked improvement versus Hertz'soverall loss of $1.2 billion for the previous calendar year.