Hertz Could Regain Advantage Locations - Analyst Blog

Shares of Hertz Global Holdings Inc. HTZ rose about 2.6% in yesterday's trading session. This followed Bloomberg's report that the company could get back some of the Advantage Rent A Car locations, which it had to sell to resolve the anti-trust issue related to the purchase of Dollar Thrifty Automotive Group Inc.

The Federal Trade Commission FTC had found the definitive merger agreement entered by both Hertz and Dollar Thrifty in Sep 2012 to be anti-competitive. Therefore, the FTC wanted Hertz to divest its Advantage business to get the merger approval.

Before completing the above-mentioned merger deal, Hertz successfully sold out the Advantage business to a wholly owned subsidiary of Franchise Services of North America Inc. However, Advantage filed for bankruptcy in November last year. As per the FTC, in an auction held in Dec 2013, Catalyst Capital Group bought Advantage assets with an intention to operate its 40 locations.

Advantage, which has about 68 rental locations across 33 states, is still left with 28 business locations after the auction. According to a filing by the parent company of Advantage, Franchise Services of North America Inc., is seeking approval from FTC to sell some of the business locations to Hertz and Avis Budget Group Inc. CAR.

Bloomberg reported FTC's statement of Hertz being ready to buy 10 Advantage locations while its rival, Avis Budget's decision to acquire 12 locations. The divestment of these assets will garner approximately $6 million of cash to Franchise Services of North America Inc.

We believe that approval from the FTC will facilitate Hertz to increase its competitive power in the industry. Notably, Hertz is the world's leading vehicle rental company.

Hertz currently carries a Zacks Rank #4 (Sell). However, some better-ranked stocks in the same industry include Odyssey Marine Exploration Inc. OMEX and Rentrak Corporation RENT. Both of these have a Zacks Rank #1 (Strong Buy).