Avis Budget drops bid for Dollar Thrifty

AP News
Posted: Sep 14, 2011 3:34 PM
Avis Budget drops bid for Dollar Thrifty

Avis Budget Group Inc. said Wednesday that it's dropping its bid to buy rival rental car company Dollar Thrifty, citing current market conditions.

The Parsippany, N.J.-based company said in a regulatory filing that while it's made significant progress toward getting antitrust approval for a deal, and believes it could get a deal approved, buying Dollar Thrifty Automotive Group Inc. isn't in its best interest anymore.

Avis' decision to bow out leaves Hertz Global Holdings Inc. as Dollar Thrifty's lone suitor, following a tug of war between Hertz and Avis that has dragged on for more than a year.

Earlier this year, Hertz offered to buy Dollar Thrifty for $57.60 in cash and 0.8546 shares of Hertz stock for each Dollar Thrifty share. That was a sweetening of a previous offer made by the Park Ridge, N.J.-based company last year and rejected by Dollar Thrifty shareholders.

But Dollar Thrifty has advised its shareholders against accepting Hertz' most recent offer.

In a statement, Scott Thompson, Dollar Thrifty's president and chief executive, said he knew his company's standalone value would make it tough for anyone to buy. But he added that he was pleased that Avis made progress toward getting antitrust approval and left the door open for another possible deal with Avis down the road.

"In this circus you just never know what the future will bring," Thompson said.

Avis originally made an informal offer for Dollar Thrifty in September of $45.79 per share in cash and 0.6543 shares of Avis. It held off on making a formal offer, because the Tulsa, Okla. Company said it wanted to work on getting antitrust approval for the deal first.

Based on Avis' Tuesday closing stock price of $11.74 and Dollar Thrifty's about 31.3 million fully diluted shares as of June 30, Avis' offer was worth about $1.67 billion.

At the time Hertz made its offer in May, its shares were worth $16.85, but they have tumbled in the months to close Tuesday at $10.02. Based on Tuesday's share price, Hertz' offer is worth about $2.07 billion.

Rich Broome, a spokesman for Hertz, said Avis' decision changes nothing for Hertz, which remains focused on getting its offer approved by the Federal Trade Commission. He declined to comment on if or when the company could possibly receive FTC approval.

But the news appeared to please Hertz investors. The company's shares jumped $1, or 10 percent, to $11.02 in afternoon trading. Meanwhile, Avis shares rose 64 cents, or 5.5 percent, to $12.39; while Dollar Thrifty shares fell 70 cents to $64.

Last month, Thompson sent letters to both Avis and Hertz asking them to submit their best and final offers by Oct. 10, in hopes of ending the nearly year-long drama, saying that continued uncertainty wasn't in anyone's best interest.

The news also comes amid Avis' plans to acquire Avis Europe in a $1 billion deal. When it originally announced that deal in June, it had boosted speculation that the company would abandon its attempt to purchase Dollar Thrifty.

The car rental industry has been consolidating for years. In 2002, Avis' parent company bought Budget, while Enterprise's parent company acquired Alamo and National in 2007.