Hertz has recently said that its private-equity investors are selling off the remaining shares that they own. It is believed that these backers own a huge $1.24 billion hold in Hertz. The backers who are selling off their shares include the Clyaton, Dubilier and Rice Carlyle Group, as well as Merrill Lynch – which is a unit of Bank of America. These two companies combined sold off an amazing 49.8 million units to Goldman Sachs.
Of course, Goldman Sachs is not looking to hold onto these shares of Hertz itself. In fact, this company is looking to re-offer these shares to other investors. This information was made public last week during a Hertz press release.
This new sale caps all previous stock deals that have taken place since Hertz went public back in 2006. It also comes as the company’s stock trades at a nearly six-year high. In fact, just this past Monday, Hertz saw its shares close at $24.96. This would mean that this deal is now worth close to $1.24 billion. If this is the case, this deal is actually the 11th largest stock transfer this year.
Of course, this is not the only deal that has been made this year. In fact, the market has seen a rising number of these kinds of deals. A lot of this has to do with increasing values in the broader market. In turn, private-equity companies have decided to take advantage of these positive conditions. They have done that by selling off a high $20.5 billion of “follow-on offerings.”
Just after this announcement was made, Hertz’s stock went down nearly 1.2 percent. Of course, it is important to note that these kinds of big stock offerings usually drive down the price of shares. Usually this happens as a way to moderate the blow or risk other buyers take that stock values will decline after such a large purchase.
The market should expect to see more people continuing to buy into the car rental industry. This has to do with the fact that car rental sales have been up all over the world. This is thanks in part to the economic downturn. After this downturn, people were forced to change the way that they travel. People were no longer using planes to go short distances. Instead, they started renting cars and driving themselves. This is cheaper on companies and businesses all over the world.
That being said, the economy has since started to recover. However, people still aren’t flying like they use to. Some experts say that it may never return to the way it was. Instead of looking for full service flights, people are looking for budget carriers. On top of that, instead of looking for budget flights for short hauls, people are still renting cars.
Due to this, people will continue to see the value of car rental companies rise on the stock market. Their stocks are going to become a high demand item. This does not just go for Hertz, this goes for all car rental companies in general.