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Dollar Thrifty Open to Avis Offer After Agreeing to Hertz Bid

A Thrifty car rental lot at O'Hare
Cars are parked at a Thrifty rental lot at O'Hare International Airport in Chicago on April 26, 2010. Photographer: Tim Boyle/Bloomberg

Dollar Thrifty Automotive Group Inc., the rental-car company that agreed to be bought by Hertz Global Holdings Inc., said it’s ready to consider a “substantially higher offer” from Avis Budget Group Inc.

Responding to Avis’s May 3 letter signaling interest in a bid, Dollar Thrifty also said yesterday in a statement that Avis “mischaracterized prior events and interactions between the two companies” and miscalculated the Hertz deal’s breakup fee. Dollar Thrifty didn’t say what those incidents were.

Avis set up a potential bidding war with its suggestion of a takeover offer for Tulsa, Oklahoma-based Dollar Thrifty. Two Dollar Thrifty shareholders said last week that Hertz was paying too little under the $41-a-share, $1.27 billion plan announced on April 26.

“Dollar Thrifty had to look at” an Avis offer, said Chris Agnew, executive director of MKM Partners LLC in Greenwich, Connecticut. He recommends buying Avis and Hertz shares and rates Dollar Thrifty “neutral.”

A serious offer from Avis might spur bidding that could take months because the car-rental business has “only one player left to be consolidated,” Agnew said.

Hertz’s “focus is going to be to continue our efforts to get our deal done,” said Richard Broome, a spokesman for the Park Ridge, New Jersey-based company. “We think there are significant antitrust issues associated with Avis Budget making a deal with Dollar Thrifty.”

Andrew Siegel, a spokesman for Avis, declined to comment. Kindra Marts, a Dollar Thrifty spokeswoman, didn’t respond to a call seeking comment.

Leisure Travel

A purchase of Dollar Thrifty would give Hertz a large foothold in leisure travel, which it now lacks, Agnew said. Avis has the Budget brand for leisure travelers and would expand in that segment by acquiring Dollar Thrifty, he said.

Dollar Thrifty rose 85 cents, or 1.7 percent, to $51.55 yesterday in New York Stock Exchange composite trading. Avis, based in Parsippany, New Jersey, fell 98 cents, or 6.5 percent, to $14.10, while Hertz declined 25 cents, or 1.8 percent, to $13.35.

Dollar Thrifty’s stock may not respond much to the company’s announcement yesterday because investors anticipated that the company would consider a rival bid, Agnew said.

Avis Chairman and Chief Executive Officer Ronald Nelson wouldn’t take questions about a possible bid yesterday during a conference call with investors and analysts to discuss first-quarter earnings. “We look forward to engaging in discussions with Dollar Thrifty’s board,” he said.

Nelson said in the May 3 letter that “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.”

Avis disclosed in the letter a plan for an April 28 dinner, set up a week before the Hertz offer, to discuss Avis’s interest in “entering into a transaction” with Dollar Thrifty.

Nelson didn’t provide details on the bid amount. He said he hired Citigroup Inc. as financial adviser and Kirkland & Ellis LLP as legal counsel.

Hertz or Dollar Thrifty may have to pay a $44.6 million fee should either back out of Hertz’s planned acquisition. The 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 Thrifty.

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