Dollar Thrifty Trades Higher After Report of Hertz Buyout
Shares of Dollar Thrifty (NYSE: DTG) spiked higher on Friday after Reuters reported that Hertz (NYSE: HTZ) was close to finalizing a deal to acquire the company. Reuters cites a shareholder who puts the figure in the $80-90 range.
Currently, shares of Dollar Thrifty are trading near $80. If the report is true, traders could still profit by taking a position in the name. If the deal does not go through, the move may be rapidly unwound.
Hertz has long been thought to be working on a deal to acquire Dollar Thrifty. Unfortunately for Hertz, anti-trust issues have prevented a deal from going through. There are currently only four major players in the industry. Hertz buying Dollar Thrifty would lead to further consolidation, and would thus draw the ire of regulators.
Reportedly Hertz has been working with the FTC to get a deal done. It's likely that Hertz would divest its own budget brand Advantage, possibly to U-Save Car & Truck Rental.
Avis (NYSE: CAR) has also reportedly been in on the deal to acquire Dollar Thrifty, and has made competitive bids against Hertz in the past. Avis traded slightly lower after that Reuters report was released. Avis could see more weakness from here if the deal is finalized, inversely, it could rapidly bounce back in the event Hertz fails to finalize its the deal.
Investors interested in the broader industry may wish to consider other companies. Zip Car (NASDAQ: ZIP) is a smaller company that, while technically not a direct competitor, is in the business of providing cars on a short-term basis to those who require them. Unfortunately for traders, Enterprise--the dominant company in the sector--is privately held.
Another factor that could influence these stocks could be the price of gasoline. With this weekend unofficially kicking off the summer driving season, lower gas prices may make consumers more likely to travel for vacations. This would stand in contrast to the so-called "staycations" that have dominated recent summers.
As commodity prices have traded down within the last month, gasoline prices have followed. Should prices stay low, it may act as a catalyst to drive shares higher.
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