Hertz merger could shift how rental fleets are supplied
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Hertz Global Holdings Inc.'s proposed acquisition plan for Dollar Thrifty Automotive Group Inc. calls for Hertz to increase its business over the long term, which eventually will mean buying more vehicles than the two companies currently buy, said a Hertz spokesman.
On the other hand, the two companies say they expect the merger's synergies to include annual savings of $65.6 million in fleet costs, in part through sharing of vehicles across rental brands. That could mean fewer purchases in the near term. The companies said they expect to realize those synergies over 24 months.
The spokesman also declined to say whether the merger would lead to changes in auto company suppliers.
"Hertz has always had the broadest range of manufacturers that we work with in the industry," said Hertz's spokesman Richard Broome. "We want to grow the combined businesses. In our business, that means buying more cars."
Close in October
In a conference call with analysts Monday, Hertz CEO Mark Frissora, the former CEO of supplier Tenneco Inc., said he expects the deal to be completed in October pending clearance from the Federal Trade Commission.
On Sunday, the two companies announced they had agreed to a merger under which Hertz would acquire Dollar Thrifty for about $2.3 billion in cash.
To satisfy the FTC and antitrust laws, Hertz will sell its Advantage Rent A Car business to Franchise Services of North America and Macquarie Capital. Certain other Dollar Thrifty assets and associated airport concessions also will be divested, Frissora said.
Franchise Services of Calgary, Alberta, and its subsidiaries own U-Save Car & Truck Rental, U-Save Car Sales, Rent-a-Wreck of Canada, Practicar, Auto Rental Resource Center, Xpress Rent A Car and Peakstone Financial Services.
Hertz will continue to rent vehicles under the Hertz, Dollar and Thrifty brands, Broome said.
Who supplies the cars
According to documents filed with the U.S. Securities and Exchange Commission, Hertz's fleet had an average of 615,600 vehicles in 2011. Its top three suppliers of vehicles are General Motors, Nissan and Toyota. Dollar Thrifty had an average corporate fleet of 107,154 units in 2011. Its top three suppliers of vehicles are Ford, Chrysler and GM.
Broome said it is "premature" to talk about auto vendors should the deal receive federal approval.
"As far as specific [auto companies] and what our strategies are, I don't think we've had any discussions on that," he said.
In discussing potential savings during a conference call with analysts, Frissora and Dollar Thrifty CEO Scott Thompson said they anticipated the merged company could share its vehicles across brands. Hertz, which specializes in business renters, does a majority of its business on weekdays, while Dollar Thrifty, which caters more to leisure travelers, does more business on weekends.
Hertz: No. 2
Chris Brown, executive editor of Auto Rental News, a publication that covers the auto rental industry, said the merger, if approved, would make Hertz the second-largest rental car company in the United States, behind Enterprise Holdings and way ahead of third-place Avis Budget Group.
Brown said the merger would give Hertz more buying power and leverage to negotiate better vehicle prices from auto companies.
He also said he doubts that Hertz would reduce the number of auto companies it buys from because there has been a move within the rental industry over the last six years or so to diversify fleets.
"The diversity of fleet is needed for their locations and their consumers," he said. "There is some crossover. … More dollars to buy means better pricing for Hertz."
5-year pursuit
Hertz and Dollar Thrifty had combined sales of $10.2 billion in the 12-month period that ended June 30, SEC documents show.
Hertz, under Frissora, had pursued Dollar Thrifty for more than five years.
"We are pleased to have finally reached an agreement with Dollar Thrifty after a lengthy -- but worthwhile -- pursuit," Frissora said in a statement. "We have always believed that a combination with Dollar Thrifty is the best strategic option for both companies."
| By the numbers | ||
| Here are the players in the latest rental-car merger. Data is for 2011. | ||
| HERTZ | DOLLAR THRIFTY | |
| Average fleet units | 615,600 | 107,154 |
| Top vehicle suppliers | GM, Nissan, Toyota | Ford, Chrysler, GM |
| Corporate revenue | $7.1 billion | $1.5 billion |
| Rental-car locations | 8,500 | 280 |
| Source: Hertz, Dollar Thrifty | ||
You can reach Arlena Sawyers at asawyers@crain.com.
