Four Brands in Car Rental May Merge
A deal to combine four of the nation’s largest car rental brands — National, Alamo, Thrifty and Dollar — is being discussed as the industry continues to consolidate.
Dollar Thrifty Automotive Group is in early talks to merge with Vanguard Car Rental, of Tulsa, Okla., which owns National and Alamo, in a deal valued at more than $3 billion, according to people involved in the discussions.
The negotiations, which have been taking place on and off for several months, are at a particularly delicate stage, these people said, and may still collapse.
If completed, a deal would create the third-largest rental car company in the United States behind leaders Enterprise Rent-a-Car and Hertz Global Holdings, but outpacing Avis Budget Group in terms of revenue.
A deal could push rental car rates higher. Prices have already risen 10 percent to 20 percent in the last year as the Detroit automakers have tried to move away from providing discounted fleet vehicles to rental car companies and focus on higher-margin retail customers.
The average rental price of a midsize car has risen to about $57 a day this year, from $52 last year, according to Neil Abrams, president of Abrams Consulting Group in Purchase, N.Y., which follows the rental car business. A merger would make sense, he said, noting that “margins are flat.” A combined company could probably squeeze millions of dollars in savings by eliminating back offices while continuing to operate all four brands as a way to segment the market.
“The only question,” Mr. Abrams added, “is whether they are both chasing after the same customer.”
And a deal would face antitrust scrutiny from regulators.
Fred Fleischner, a spokesman for Dollar Thrifty, declined to comment, citing the company’s policy “not to comment on rumors.”
J. J. Rissi, a spokeswoman for Cerberus Capital Management, which owns Vanguard, also declined to comment.
A merger would be the latest in a flurry of deals in the car rental business. Hertz was bought from Ford Motor in December 2005 by a consortium of private equity firms. In November, Hertz went public at $15 a share. (It closed yesterday at $20.36.) Avis Budget Group was recently spun off in the breakup of the Cendant Corporation.
Last week, Dollar Thrifty, a publicly held company with a market value of $1.13 billion, may have signaled to the market that it is considering a deal. In a regulatory filing, the company said that it had amended its employment agreement with its chief executive, Gary L. Paxton, and with other top employees. The amendment redefined a change-of-control provision to more than 60 percent of the company, up from more than 50 percent. The changes also included how long employees had to wait before leaving the company with compensation.
A deal with Vanguard would most likely be a reverse merger, so that Vanguard would be the controlling shareholder.
Vanguard has tried to go public before. Last year it filed for an initial public offering, saying that it had earned $105.3 million in income from $2.89 billion in revenue in 2005. It said that it held a 20.5 percent market share in the top 125 airport markets where it operated, behind the Avis Budget Group, then controlled by Cendant, and Hertz. Vanguard paid a $122.6 million special dividend last June.
In that same filing, Vanguard said it had about 3,800 locations in 82 countries as of last June. Its fleet numbered about 300,000, the filing said. The company said it buys its fleet from General Motors and DaimlerChrysler, and had agreements with other manufacturers like Toyota and Kia.
Cerberus Capital Management acquired Vanguard out of bankruptcy for $240.1 million in cash when it was called the ANC Rental Corporation.
The National car rental brand first entered use in 1947, while Alamo emerged in 1973. In the mid-1990s, H. Wayne Huizenga’s Republic Industries acquired both, combining them into ANC. Republic Industries, now known as AutoNation, spun off ANC in 2000. By 2001, ANC had filed for bankruptcy.
Dollar was founded in 1965 in Los Angeles and acquired by the Chrysler Corporation in 1990, making it part of the carmaker’s Pentastar Transportation Group, alongside Thrifty. Chrysler filed for an initial public offering of the rental car unit in November 1997. The company has 400 locations worldwide, including 260 locations in the United States, and a fleet of 188,000 cars worldwide, mostly DaimlerChrysler models.
Article from http://www.nytimes.com/
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Dollar Thrifty Automotive Group is in early talks to merge with Vanguard Car Rental, of Tulsa, Okla., which owns National and Alamo, in a deal valued at more than $3 billion, according to people involved in the discussions.
The negotiations, which have been taking place on and off for several months, are at a particularly delicate stage, these people said, and may still collapse.
If completed, a deal would create the third-largest rental car company in the United States behind leaders Enterprise Rent-a-Car and Hertz Global Holdings, but outpacing Avis Budget Group in terms of revenue.
A deal could push rental car rates higher. Prices have already risen 10 percent to 20 percent in the last year as the Detroit automakers have tried to move away from providing discounted fleet vehicles to rental car companies and focus on higher-margin retail customers.
The average rental price of a midsize car has risen to about $57 a day this year, from $52 last year, according to Neil Abrams, president of Abrams Consulting Group in Purchase, N.Y., which follows the rental car business. A merger would make sense, he said, noting that “margins are flat.” A combined company could probably squeeze millions of dollars in savings by eliminating back offices while continuing to operate all four brands as a way to segment the market.
“The only question,” Mr. Abrams added, “is whether they are both chasing after the same customer.”
And a deal would face antitrust scrutiny from regulators.
Fred Fleischner, a spokesman for Dollar Thrifty, declined to comment, citing the company’s policy “not to comment on rumors.”
J. J. Rissi, a spokeswoman for Cerberus Capital Management, which owns Vanguard, also declined to comment.
A merger would be the latest in a flurry of deals in the car rental business. Hertz was bought from Ford Motor in December 2005 by a consortium of private equity firms. In November, Hertz went public at $15 a share. (It closed yesterday at $20.36.) Avis Budget Group was recently spun off in the breakup of the Cendant Corporation.
Last week, Dollar Thrifty, a publicly held company with a market value of $1.13 billion, may have signaled to the market that it is considering a deal. In a regulatory filing, the company said that it had amended its employment agreement with its chief executive, Gary L. Paxton, and with other top employees. The amendment redefined a change-of-control provision to more than 60 percent of the company, up from more than 50 percent. The changes also included how long employees had to wait before leaving the company with compensation.
A deal with Vanguard would most likely be a reverse merger, so that Vanguard would be the controlling shareholder.
Vanguard has tried to go public before. Last year it filed for an initial public offering, saying that it had earned $105.3 million in income from $2.89 billion in revenue in 2005. It said that it held a 20.5 percent market share in the top 125 airport markets where it operated, behind the Avis Budget Group, then controlled by Cendant, and Hertz. Vanguard paid a $122.6 million special dividend last June.
In that same filing, Vanguard said it had about 3,800 locations in 82 countries as of last June. Its fleet numbered about 300,000, the filing said. The company said it buys its fleet from General Motors and DaimlerChrysler, and had agreements with other manufacturers like Toyota and Kia.
Cerberus Capital Management acquired Vanguard out of bankruptcy for $240.1 million in cash when it was called the ANC Rental Corporation.
The National car rental brand first entered use in 1947, while Alamo emerged in 1973. In the mid-1990s, H. Wayne Huizenga’s Republic Industries acquired both, combining them into ANC. Republic Industries, now known as AutoNation, spun off ANC in 2000. By 2001, ANC had filed for bankruptcy.
Dollar was founded in 1965 in Los Angeles and acquired by the Chrysler Corporation in 1990, making it part of the carmaker’s Pentastar Transportation Group, alongside Thrifty. Chrysler filed for an initial public offering of the rental car unit in November 1997. The company has 400 locations worldwide, including 260 locations in the United States, and a fleet of 188,000 cars worldwide, mostly DaimlerChrysler models.
Article from http://www.nytimes.com/
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