FTC Seeks More Divestitures in Hertz-Dollar Thrifty Deal
Hertz Global Holdings Inc. (HTZ), seeking U.S. approval to buy Dollar Thrifty Automotive Group Inc., is being pressed by antitrust regulators to shed at least a dozen more airport locations than it previously agreed to, two people familiar with the situation said.
Talks with the Federal Trade Commission about unloading the airport counters are continuing and testy, with both sides bracing for a possible lawsuit, said the people, who asked not to be identified because the negotiations are confidential. The counters at issue could be placed with a trustee for auction later to avoid more delay in closing the deal, the people said.
The $2.6 billion acquisition is meeting resistance at the FTC over the market share the combined company would command at airports, according to the people. Hertz, with 8,750 outlets worldwide, has more than 3,900 airport and non-airport locations in the U.S., while Dollar Thrifty (DTG) has about 280 outlets in the U.S. and Canada.
“It would seem the FTC has given them a clear path to approval and one that’s not that much more painful than the one they were already on,” Fred Lowrance, a Nashville, Tennessee- based analyst at Avondale Partners LLC, said in an interview.
The additional airports may represent $75 million in annual revenue and about $10 million in profit, which would reduce the profit per share Hertz stands to gain from the acquisition by about 2 cents, Lowrance said.
Last month, Hertz extended the FTC’s legal deadline for ruling on the deal to Nov. 16 from Oct. 31 because the agency hadn’t finished its review of information provided by the companies, Park Ridge, New Jersey-based Hertz said in a statement. When Hertz announced the proposed acquisition on Aug. 26, it said FTC approval was expected by mid-October.
Talks about the 12 to 15 airport divestitures follow Hertz’s agreement to sell its Advantage brand to Franchise Services of North America Inc. (FSN) and Macquarie Capital. While the FTC staff has raised concerns about the strength of the buyer and its ability to become a viable competitor, those questions aren’t a deal-breaker with regulators, the people said.
The bureaus of competition and economics have recommended approval of the deal and sent its findings to the five FTC commissioners, the people said. Approval requires a simple majority.
Hertz, which has sought to take over Dollar Thrifty for more than five years, agreed to sell its 62 Advantage brand locations in the U.S. to address FTC concerns that going from four major companies to three would crimp competition in the rental-car market, the people said.
Cecelia Prewett, an FTC spokeswoman, declined to comment on the status of the agency’s review. Richard Broome, a Hertz spokesman, also declined to comment.
The four largest companies -- Enterprise, Hertz, Avis Budget Group Inc. (CAR) and Dollar Thrifty -- control 80 percent of the U.S. market, according to market researcher IBISWorld.
Dollar Thrifty, based in Tulsa, Oklahoma, rose 5.4 percent to $84, and Hertz jumped 7.3 percent to $14.34 at the close in New York. Both were the biggest gains since the day after the acquisition was announced.