Hertz to Purchase Dollar Thrifty; Remarketing Impact?
PARK RIDGE, N.J. — Hertz Global Holdings has signed an agreement to buy Dollar Thrifty Automotive Group in a move officials said will help Hertz grow its global footprint and become the second largest vehicle-rental company in the U.S., among other benefits.
Hertz is paying approximately $1.2 billion in cash and stock to acquire Dollar Thrifty.
"Having Dollar Thrifty under the Hertz family of brands, products and services will allow us to expand our global presence, boost our market position and realize the financial benefits from substantial synergies from between the two companies," Hertz chairman and chief executive officer Mark Frissora said during a conference call Monday.
Frissora said the company hasn't had any "officials discussions" with the Federal Trade Commission yet, but suggested that Hertz remains "very confident" the transaction will gain approval.
"We feel pretty good about our position there. We've certainly been advised by a great team of lawyers and so has Dollar Thrifty," he noted. "Based on that review, we feel highly confident the transaction will pass the muster.
"I think it's fair to say we wouldn't have embarked on this transaction unless we had a high degree of confidence that it would be approved," Frissora continued.
In an official statement, Dollar Thrifty president and chief executive officer Scott Thompson talked about how the landscape of the rental market has changed over the last few years, and how joining Hertz will be beneficial.
"Being associated with a larger company that has a broader base of revenues and access to greater technology will allow the Dollar and Thrifty brands to grow at a much more rapid pace than as a stand-alone company," Thompson noted.
"Enterprise's acquisition of Alamo and National a few years ago certainly changed the industry and our competitive position," he explained further. "Our relative size compared to the big three in the industry (Enterprise, Avis and Hertz) made an offer to join a larger company compelling."
When the acquisition is completed, Frissora said the Hertz's worldwide presence will expanded by 1,550 stores, bringing the company's store count up to roughly 9,800 locations throughout six continents. Moreover, the company's its multi-brand U.S. market share is expected to grow to 24 percent, up from 19 percent.
"We're excited about the opportunity to further expand our customer reach. This is clearly a strategic acquisition. We believe Dollar Thrifty is an excellent fit for Hertz," Frissora shared. "Together, we'll be able to compete even more effectively and efficiently against other multi-brand car rental companies offering customers a full range of rental options between Hertz, Dollar, Thrifty and Advantage brands."
Continuing on, Frissora offered a bit on insight on Hertz's remarketing efforts during Monday's call.
He stated: "Even without Dollar Thrifty, we continue to shift our mix in selling cars on a remarketing basis to nontraditional channels like auctions. Our goal is to get 50 percent of our sales to be non-auction, either dealer direct or through Hertz Rent2Buy.
"As that improves, we obviously drive the depreciation down per car because we're getting $300 more per car on average. That helps the depreciation number," Frissora continued. "We believe the guidance we've given so far is conservative. As we get better and better remarketing, there's upside in terms of our net depreciation per vehicle."
Impact on Other Rentals
So, how does Monday's news impact other players in the rental segment? According to the chairman and CEO of Avis Budget Group — which went into a two-brand strategy seven years ago — said neither his company nor the overall industry would be greatly impacted by the move, but it could hold some significant benefits for Hertz.
"Seven years ago, Avis Budget Group began operating under a dual-brand strategy — with a brand in the premium sector and a brand in the value sector," Avis Budget's Ronald Nelson said. "We believe there are significant benefits associated with such a strategy. We know firsthand that integrating two companies will require some time and a lot of work. If done successfully, Hertz may find significant cost synergies."
He continued: "We do not expect the acquisition of Dollar Thrifty to have a significant impact on us at this point. These are brands we already compete against in the industry.
"The fact is the dynamic in our industry has not really changed as a result of this announcement. We competed with Hertz when they ranked as the third-largest company on-airport and we will continue to compete with them," Nelson continued. "The Hertz transaction reflects the nature of our highly competitive industry."
Meanwhile, Michael Bystrom, Enterprise Holdings' vice president of remarketing operations for North America, told Auto Remarketing: "It obviously is too early to have a formal point of view on today's announcement. However, we remain confident in our long-term strategy and our brands' ability to compete, both in the overall car rental industry and in the remarketing business.
"Our focus always has been, and always will be, on exceeding customer expectations, and that won't change, even if the dynamics of the industry change," he concluded.