Rental car company Hertz announced its intention to acquire fleet vehicle and management company Donlen Corp. for 250 million dollars, plus assuming Donlen's debt.
Hertz will take on Donlen's 680 million in debt, putting the total cost of the deal for the company at 930 million. The deal has already been approved by both companies' board of shareholders and will be completed in the third quarter.
Donlen offers year-long rental leases and currently leases 144,000 cars a year in the United States, Canada, and Mexico. The ability to lease cars year round is something that Hertz had been looking to do, in addition to its very successful short-term rental program.
This fits in with our asset-light, technology-driven strategy, Hertz chief executive Mark Frissora told The Wall Street Journal. We didn't offer vehicles on a yearly basis and now we will have that ability with Donlen. So it's very complementary.
The deal is not expected to hinder Hertz's long term pursuit of the Dollar Thrifty rental company. Hertz has been engaged in a bidding war for over a year with rival Avis to acquire the Oklahoma-based Dollar Thrifty.
We're certainly financially capable of handling both acquisitions, Hertz spokesman Richard Broome told Bloomberg News. Donlen's easily digestible for us and won't affect our pursuit of Dollar Thrifty in any way.
Hertz had thought it had the company locked up in April 2010 before Avis entered in a higher bid at the last minute. It then looked like Avis might come out victorious; the company went through the regulatory process, before Hertz retaliated with its own late bid this May.
Currently Dollar Thrifty has until August 5th to decide on whether to accept Hertz's offer. Previously executives had encouraged shareholders to reject Hertz's 2.05 billion bid.
Avis doesn't appear to be as formidable of an opponent for Dollar Thrifty, as it recently purchased Avis Europe for 1 billion. Even without the source of competition though, it's not certain that Dollar Thrifty's shareholders will finally accept the Hertz bid.