Market Overview

Bidding War!! Dollar Thrifty Soars on New Offer From Hertz (DTG, HTZ, CAR)

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Shares of Dollar Thrifty Automotive (NYSE: DTG) are surging 13% from yesterday's close to $78.69, as rival car rental company Hertz (NYSE: HTZ) Global offered to buy the company for $72 per share ($57.60 in cash and 0.8546 in stock).

This offer by Hertz is the latest in the string of offers made to Dollar Thrifty, as Hertz and Avis Budget Group (NASDAQ: CAR) have been battling each other to acquire the company for over a year.

The offer and counter offer battle looks like this:

April 26, 2010 – Hertz offers to purchase Dollar Thrifty $41 per share. Deal was eventually rejected by shareholders.

May 3rd, 2010 – Avis announces plans to make a “substantially higher offer” for Dollar Thrifty.

July 29th, 2010 – Avis offers to purchase Dollar Thrifty for $46.50 per share. The offer was rebuffed due to concerns regarding Avis' ability to clear antitrust hurdles.

September 2nd, 2010 – Avis offers to purchase Dollar Thrifty to what amounted to $48.00 per share.

September 13th, 2010 – Hertz offers to purchase Dollar Thrifty for $50 per share in cash and stock.

September 23rd, 2010 – Avis offers to purchase Dollar Thrifty for $53.04 per share in cash and stock.

May 9th, 2011 – Hertz offers to purchase Dollar Thrifty for $72 per share in cash and stock.

Hertz's latest offer comes in conjunction with an announcement that it will be attempting to sell its lower end Advantage Brand. Hertz CEO Mark Frissora revealed that there are already five interested buyers for the segment.

Hertz is looking to unload the Advantage Brand in order to avoid any possible antitrust concerns in the future, as Dollar Thrifty is considered to be a lower end car rental company. Hertz, as it stands, mainly focuses on higher end rentals.

Frissora said that he has been “waiting and watching for a long time” while the potential deal between Avis and Dollar Thrifty has been working its way through the Federal Trade Commission (FTC) with little progress. That lack of progress prompted Hertz to make its latest offer, which Fissora, in a letter to Thrifty CEO Scott Thompson, said is Hertz's “highest priority.”

The fact that shares of Dollar Thrifty are currently trading well above the new $72 offer price is an indication that investors are expecting another counteroffer from Avis.

Mike Shannon at Westchester Capital Management, the third largest investor in Dollar Thrifty, said in reference to the offer, “We'd like to see it higher – a friendly deal. If Dollar Thrifty were to sit down with Hertz, the offer could be ten percent higher.”

Investors purchasing shares of Dollar Thrifty over $72 may be disappointed, however, as Hertz is mobilizing to close the deal quickly. It has already initiated talks with the FTC and is anticipating the transaction to finalize in the third quarter.

Avis declined comment on Hertz's new offer.

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