Hertz Takes Another Bite at the Dollar Apple

Hertz announced this morning that it was giving the acquisition of Dollar Thrifty another go.  You'll remember that last year, Dollar terminated its agreement with Hertz after Dollar shareholders voted no on its $50/share offer.   The sharehodler vote followed sharehiolder litigation in Delaware to try to get the deal protections in the Hertz-Dollar deal invalidated (In re Dollar Thrifty), resulting in a termination of the merger agreement.  Following which Dollar and Avis entered into protracted - and so far unsuccessful = talks amongst themselves and the antitrust authorities about getting a deal done.  

Apparently, Hertz has decided enough is enough and has decided to jump back in - hoping that Dollar shareholders will think differently this time around. Here's a summary of the new offer from the Hertz press release:

Hertz will offer Dollar Thrifty shareholders $72.00 per share (based on Hertz's closing stock price on May 6, 2011), consisting of $57.60 in cash and 0.8546 shares of Hertz.  The offer represents:

    * a 26% premium and 18% premium to Dollar Thrifty's 90-day and 60-day average share price, respectively;

    * a 7.6x multiple of Dollar Thrifty's LTM EBITDA for the period ended March 31, 2011; and a 24% premium to the value of the entirely hypothetical price announced by Avis Budget Group, Inc. ("Avis Budget") over seven months ago.

In an e-mail to employees, Hertz's CEO Mark Frissora provides a little more information about their reasons for giving the acquisition of Dollar one more try.

You may wonder why we are moving forward now after the unsuccessful Dollar Thrifty shareholder vote last fall.  First, the vote did not prevent Hertz from re-engaging at any time of our choosing.  Additionally, economic conditions continue to improve, creating revenue growth opportunities over the next several years.  Moreover, Avis has been trying unsuccessfully for the past 12 months to secure government approval to buy Dollar Thrifty and all they have to show for their year-long efforts are "constructive discussions" with U.S. regulators.  We don't believe Avis can get a deal done and the time is right to resolve this matter once and for all to our and Dollar Thrifty's satisfaction.

In contrast with Avis, we've picked up where we left off with the government last fall and we are confident we can secure its consent to proceed.  Unfortunately, that will mean divesting Advantage Rent-a-Car in the U.S., which is not our preference, but it's clear that a merger with Dollar Thrifty becomes far more difficult if the government opposes the transaction.

For its part, Hertz appears to be taking an aggressive stance towards offering Dollar's shareholders a deal they can't refuse.  It's offering an improved bid and is committing to  sell its Advantage rental brand (e-mail to Advantage employees)- to help clear the way for regulators to provide clearance to the proposed transaction. We'll see how Dollar II proceeds and whether shareholders have a different view on the transaction given what they've seen over the past few months. 

Visit the M&A Law Prof Blog, hosted by Brian JM Quinn, for blogs on legal developments in corporate governance and mergers & acquisitions.

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