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Hertz Global Holdings Inc. (HTZ - Snapshot Report), engaged in vehicle and equipment rental operations, announced a definitive merger agreement with Dollar Thrifty Automotive Group Inc. (DTG) on August 26, 2012. Per the agreement, Hertz would pay $87.50 for every Dollar Thrifty share in an all-cash deal of about $2.3 billion. Recently, Hertz started its cash tender offer to acquire all outstanding shares of Dollar Thrifty.
Hertz proclaimed that after the closing of the cash tender offer, every stockholder of Dollar Thrifty will receive $87.50 per share in cash, excluding the interest amount and any withholding taxes, provided the shares are properly tendered and not withdrawn during the offer period.
Both the abovementioned companies have filed the necessary documents to give effect to the transaction dealt by them. A consortium of banks is acting as financial advisors to Hertz and Dollar Thrifty.
Management believes that the proposed deal with Dollar Thrifty has a very strong potential and will transform the company into multi-brand leader in car rental providers through its recognized portfolio and value brands, which will offer customers a wide range of sophisticated rental options.
Moreover, management has full confidence on this strategic alliance and believes that the company can provide varied range of rental options to customers globally via Dollar Thrifty vast international existence.
The deal will fetch various synergistic and growth opportunities to Hertz, which will be accretive to its top line. Benefiting from increased productivity, effective use of assets, better management, the company forecasts $160 million annual cost savings.
Additionally, Hertz announced that it will divest its Advantage business to Franchise Services of North America (FSNA) and Macquarie Capital. Hertz will divest this business on the successful completion of the tender offer with Dollar Thrifty.
During the first quarter of 2012, Hertz’s equipment rental division - Hertz Equipment Rental Corporation (HERC) - completed the acquisitions of Cinelease and Arpielle. Management believes that the acquisitions have already started paying off through incremental revenue growth, which led to increased profits.
Hertz, which competes with Avis Budget Group Inc. (CAR - Analyst Report), carries a Zacks #3 Rank, translating it into short-term Hold rating for the next 1-3 months and correlates with our long-term ‘Neutral’ recommendation on the stock.
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