Hertz Global Holdings Inc
Hertz's latest bid for Dollar Thrifty -- a $1.2 billion offer in April, 2010 was rejected by Dollar Thrifty shareholders last September -- comes as the car rental industry is enjoying improved demand in a rebounding travel and tourism business.
Dollar Thrifty last week reported market-beating quarterly results and raised its profit outlook for the year. Avis has also posted a quarterly profit on a resurgent travel industry in the United States and overseas.
Hertz has been looking to boost its presence in the $10 billion off-airport market and grow into new regions and sectors since it lost out in the chase for Dollar Thrifty last year.
In October it agreed to buy Melbourne-based Flexicar for an undisclosed sum, making inroads into the Australian car-sharing market. Three of the five deals it has struck in the last seven months were targeted at the growing equipment rental sector, which has become a major growth engine for Hertz.
Hertz said it will go direct to Dollar Thrifty shareholders offering $72 a share -- a 3 percent premium to Dollar Thrifty's Friday close -- comprising $57.60 in cash and 0.8546 Hertz shares.
Dollar Thrifty shares rose 8.7 percent to $75.75 in pre-market trade on Monday, indicating investors expect the bidding could go higher.
Dollar Thrifty and Avis have been pursuing antitrust clearance since October, when Avis came in with a cash-and-stock offer for Dollar Thrifty that is currently worth $1.67 billion based on Avis' Friday close.
That protracted approval process -- Avis already has a budget brand that competes with Dollar Thrifty -- has brought Hertz back into the fray.
Avis Budget has been unable to produce a viable antitrust remedy, despite an entire year of discussions with the FTC with no end in sight, Hertz CEO Mark Frissora said in a statement, referring to the U.S. Federal Trade Commission.
Antitrust concerns have been key in the battle for Dollar Thrifty. During the bidding war last year, Dollar Thrifty stuck to Hertz's lower offer and rejected Avis' advances saying it would be tough to win antitrust approval.
Hertz is thought to have a clearer path to a regulatory green light as it focuses more on higher-priced car rentals. Dollar Thrifty's attraction is its low-cost offerings.
Only after shareholders voted against the initial Hertz offer did Dollar Thrifty's management agree to cooperate with Avis on efforts to win clearance.
Consolidation in the U.S. car rental market has been rapid, leaving four major rivals -- Hertz, Avis, Dollar Thrifty and privately-held Enterprise Rent a Car.
The industry had earlier raised concerns that both Avis and Hertz could draw scrutiny from antitrust authorities. Both had received a 'second request' proposal from the FTC regarding their offers. Second request means the FTC wants more information before approving a deal.
During last year's bid war, Avis said it was willing to sell off up to $325 million worth of revenue or businesses to win antitrust approval. Hertz had agreed to offload its Advantage brand and up to $175 million worth of revenue generating business lines.
Barclays Capital, Lazard, Bank of America Merrill Lynch and Deutsche Bank Securities are acting as financial advisers to Hertz.
Hertz shares hit a 41-month high earlier this month and Dollar Thrifty shares have gained 48 percent so far this year as part of a 14-fold increase in 2 years. On Nasdaq, Avis shares are up 18 percent this year.
Dollar Thrifty shares have risen 79 percent since Hertz's first offer just over a year ago.
(Reporting by A. Ananthalakshmi in Bangalore; additional reporting by Bijoy Koyitty; Editing Ian Geoghegan)