Dollar Thrifty Surges on Avis Letter

Arthi Gupta
03 May, 2010
New York City

Avis Budget Group in a letter to Dollar Thrifty Automotive Group said it is prepared to make a substantially higher offer. Dollar Thrifty stock soared 14%.

[R]12:10 PM – Avis Budget Group in a letter to Dollar Thrifty Automotive Group said it is prepared to make a substantially higher offer. Dollar Thrifty stock soared 14%.[/R]

Avis Budget Group Inc. said it would like to make a “substantially higher” counteroffer to Hertz Global Holdings Inc.’s bid to acquire rental-car company Dollar Thrifty Automotive Group Inc.

Avis Budget Group, Inc. today sent a letter to the Board of Directors of Dollar Thrifty Automotive Group, Inc. regarding Dollar Thrifty’s proposed transaction with Hertz.

The Chairman and Chief Executive Officer of Avis Budget Group, Inc., Ronald L. Nelson expressed surprise that Dollar Thrifty had signed a definitive agreement to be acquired by Hertz for approximately $41 per share, of which only about $34 is being funded by Hertz itself.

Ronald Nelson further stated that the Hertz offer is primarily cash and Dollar’s shareholders, in addition to being offered virtually no premium to a stock price would have little opportunity to participate in the substantial upside associated with the company’s improving results.

Nelson said in his letter, “We would like to make a substantially higher offer to acquire Dollar Thrifty, especially in light of your recent performance and the potential synergies associated with an acquisition of Dollar Thrifty by Avis Budget.

We are confident that the antitrust analysis and clearance timetable for an Avis/Dollar Thrifty transaction are comparable to those associated with a Hertz/Dollar Thrifty transaction. In that regard, we would be prepared to sign an appropriate non-disclosure agreement. We also request that the egregious provisions of the merger agreement be eliminated so that a level playing field can be created.”

Dollar surged 14% to $50.20, exceeding the $41 that Hertz valued its offer for Dollar on April 26, after Avis Chief Executive Officer Ronald Nelson sent a letter of interest to Dollar’s chairman and CEO.

The Avis’s letter adds pressures for Hertz to increase its offer. The Hertz offer was 5.5% more than Dollar’s April 23 close.

Dollar rose $6.21 or 14% to $50.20. Hertz fell 54 cents, or 3.7% to $13.92, while Avis slid 17 cents, or 1.1% to $14.95.

Hertz or Dollar may have to pay a $44.6 million fee should either back out of Hertz’s planned acquisition of the smaller car-rental company. The termination fee, as well as reimbursement of as much as $5 million in costs related to the transaction, was disclosed April 29 in a regulatory filing by Dollar.