TOKYO (Bloomberg) -- Hertz Global Holdings Inc., the former Ford unit and the world’s largest car-rental company by market value, agreed to buy Dollar Thrifty Automotive Group Inc. for about $1.2 billion in cash and stock as a rebounding global economy spurs travel.
The offer is worth $41 a share, Hertz said today in a statement, a 5.5 percent premium from April 23.
Hertz, based in Park Ridge, N.J., adds Dollar and Thrifty to its namesake and Advantage brands to compete against Avis Budget Group Inc. as travel rebounds following last year’s recession. Hertz, which also raised its full-year earnings forecast, will expand its global network to 9,800 outlets to gain sales outside the U.S.
“This gives them a four-brand strategy, which should give them an advantage competitively and allow them to share one back office and an opportunity to share fleet,” said John Healy, an analyst at Northcoast Research Holdings in Cleveland.
The International Monetary Fund last week raised its 2010 global growth forecast to 4.2 percent from 3.9 percent. Worldwide airline passenger traffic rose 9.5 percent in February from a year earlier, the biggest jump in more than two years, according to the International Air Transport Association.
“This adds a mid-level brand that should supplement the high-price and status brand of Hertz,” said Bob McAdoo, a senior analyst at Nashville-based Avondale Partners LLC.
The purchase will result in cost savings of at least $180 million from the purchase, including car purchasing and information technology systems, Hertz said.
“We believe the deal is attractive, accretive to earnings and structured to maintain Hertz’s strong credit profile,” CEO Mark Frissora said in the statement. “Together, we will be able to compete even more effectively and efficiently against other multibrand car rental companies.”
Frissora is the former CEO of supplier Tenneco Inc.
Under the terms of the agreement, Dollar shareholders will receive $32.80 in cash, including a special dividend from Dollar, and 0.6366 of a Hertz share for each stock they hold, according to the statement. The per-share price was based on April 23 close, Hertz said. Dollar is based in Tulsa, Okla.
North American acquisitions down
Hertz said today it expects to report full-year adjusted pretax income of $290 million to $305 million and sales of as much as $7.7 billion. First-quarter sales increased 6.1 percent to $1.7 billion. The company narrowed its net loss in the period to $150.4 million from $163.5 million.
North American companies have been involved in acquisitions worth $261 billion so far this year, falling from $364 billion a year earlier, according to data compiled by Bloomberg. The global figure is $616 billion, compared with the year-earlier $610 billion.
Hertz is the largest worldwide airport car-rental brand, operating from more than 8,200 locations in 146 countries, the release said.
Ford Motor Co. in December 2005 sold Hertz to Clayton Dubilier & Rice Inc., the Carlyle Group and Merrill Lynch’s buyout unit. The car-rental company raised $1.32 billion in an initial share sale less than a year later.