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Hertz allows FTC more time to consider Dollar Thrifty takeover

Dollar Thrifty (top) & Hertz (bottom) LogosHertz Global Holdings has announced that it has agreed to extend the deadline of its timing deal with the Federal Trade Commission (FTC) from 11:59pm on October 31 to the same time on November 16. This comes as the FTC is seeking assurances that the company’s potential merger with Dollar Thrifty Automotive Group, a deal worth $2.3 billion, will save consumers money. A source says that the regulator is studying figures provided by both car rental providers and questioning them.

Hertz and Dollar Thrifty are still assisting the FTC in its investigation of the relevant information and are working to address concerns raised by the commissioners and staff. There’s no assurance as to what the regulator may do in connection with the proposed merger, and there are no assurances that it will make a decision before the new November 16 deadline. According to reports, two top shareholders at Dollar Thrifty have been cited saying that they aren’t worried about the extension and expect the merger to be approved.

It’s Hertz’s hope that approval from the FTC for the takeover will motivate Dollar Thrifty shareholders to tender their shares. Its $87.50 per share bid represents an 8% premium on the smaller rival’s $81 closing price as of August 24. This is more than double the $41 per share offered the first time, which was made in April 2010 and rejected by investors.

Hertz wants to take over Dollar Thrifty to make a step up in the US market, where it will become the second largest car hire operator if the merger is completed. Enterprise Holdings is the biggest and Avis Budget Group is currently second but will drop to third. These top three currently control about 75% of the US market already, and they will be the remaining major rental providers in the US if the merger is approved by the FTC. This could be the final consolidation in the market to gain such approval.

Dollar Thrifty is currently the fourth biggest car rental operator, employing 780 people in Tulsa, Oklahoma (5,900 worldwide) and controlling 5% of the market. Hertz has a big operations centre in Oklahoma City, the state’s capital, and says it will conduct a study of both businesses when the deal is finished before it makes any decisions about where to locate its joint operations and what cuts will be needed. Hertz has already agreed to sell its budget Advantage Rent a Car System to appease concerns at the FTC that the company would gain too much of the leisure sector. This is because the Dollar Rent A Car and Thrifty Car Rental brands are rivals to Advantage in the budget leisure market.

Meanwhile, Franchise Services of North America (FSNA) has issued an update to previous announcements regarding its agreement to take over Simply Wheelz, which owns Advantage Rent a Car Systems, and other divested assets from Hertz Global Holdings. The completion of this transaction is subject to several conditions, and one of them is that Hertz and Dollar Thrifty complete their merger. It noted that the timing agreement was extended and reiterated that there’s no assurance the merger will be completed.

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