Antitrust regulators Thursday approved Hertz Global Holdings Inc.'s $2.3 billion acquisition of Tulsa-based Dollar Thrifty Automotive Group under a settlement that required Hertz to sell locations at airports across the nation.
Hertz CEO Mark P. Frissora said the “compelling settlement” with the Federal Trade Commission clears the way for the acquisition of Dollar Thrifty, a goal Hertz sought for more than two years.
“We have always believed that a combination with Dollar Thrifty is the best strategic option for both companies, and we look forward to becoming a stronger global competitive player in the industry,” Frissora said in a statement. “We are confident that the employees, customers and shareholders of both companies will benefit from the value this combination will create.”
Dollar Thrifty has nearly 800 employees in Tulsa. Hertz employs about 1,700 in Oklahoma City. Hertz earlier said it would evaluate staffing and operations at the two cities after the merger.
The transaction ends a long courtship of Dollar Thrifty by Hertz that also included competing bids from industry leader Avis, which eventually dropped out of the process. Hertz had considered Dollar Thrifty a target as far back as 2007, but the 2008 economic collapse battered the rental car business and nearly brought down Dollar Thrifty.
In early 2009, Dollar Thrifty shares sold for less than $1 a share as management negotiated with creditors while simultaneously preparing for a potential bankruptcy. The company struck deals with lenders, reworked a supply contract with Chrysler, and the stock price came roaring back along with the travel business.
The deal combines Hertz's premium market with Dollar Thrifty's value business. Hertz, in a news release, said the combination will allow Dollar Thrifty to expand its value leisure-focused brands in key car rental markets around the world, while providing Hertz instant scale with the Dollar and Thrifty brands with airport concessions in the value segment.
Hertz's tender offer of $87.50 per share is scheduled to close Friday. That's more than double what Hertz offered in 2010, a bid that was rejected by Dollar Thrifty shareholders.
The Federal Trade Commission said the current deal as originally structured would have reduced competition at 72 airports, enabling the combined firm to hike rental car prices in those locations.
Hertz last year earned about $3.3 billion in U.S. car rental revenues from airport transactions — about 26 percent of the national market share. Dollar Thrifty earned about $1.4 billion in U.S. car rental revenues last year, with roughly 90 percent of that generated by airport locations. Dollar Thrifty's national market share of airport car rentals is about 12 percent.
Those firms, along with Avis Budget Group and Enterprise Holdings Inc., control about 98 percent of U.S. airport car rentals.
“American consumers rent more than 50 million vehicles at airports nationwide each year, spending $11 billion, so this is a real pocketbook issue for everyday people,” FTC Chairman Jon Leibowitz said. “Today's bipartisan action by the FTC will ensure that consumers are not forced to pay higher prices for rental cars when they travel.”
Hertz will sell its Advantage Rent A Car business and 16 Dollar Thrifty on-airport locations where Advantage does not operate to Franchise Services of North America Inc. and Macquarie Capital Inc. Hertz will sell another 13 Dollar Thrifty on-airport locations to a buyer approved by the Federal Trade Commission after the deal closes.
The dissenting vote on the five-member commission, J. Thomas Rosch, said he opposed the settlement because he thought it didn't go far enough.
“I would have instead voted to challenge the transaction because of the significant risk of post-merger coordinated interaction among the remaining competitors,” Rosch said in a statement issued by the FTC.