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Dollar Thrifty Receives $46.50 Per Share Offer From Avis Budget, Topping Hertz Bid - Update

(RTTNews) - Car rental company Dollar Thrifty Automotive Group, Inc. (DTG) said Wednesday that it has received an unsolicited bid from Avis Budget Group, Inc. (CAR) to acquire the company for cash and stock. The $46.50 per share bid by Avis tops an earlier cash and share bid by Hertz Global Holdings Inc. (HTZ) of $41 per share. Dollar Thrifty said its board of directors will review and consider the terms of the Avis Budget offer, signaling that a bidding war for the company may be underway.

Tulsa, Oklahoma-based Dollar Thrifty said it received a letter dated July 28, 2010, from Avis, outlining an unsolicited proposal to acquire all Dollar Thrifty common stock for $46.50 per share. The offer consists of $39.25 in cash and 0.6543 shares of Avis stock per Dollar Thrifty share, but is 4.48% lower than Dollar Thrifty's closing stock price on Wednesday of $48.68 on the New York Stock Exchange.

Dollar Thrifty noted that it has executed a definitive merger agreement with Hertz on April 25, 2010 and continues to be bound by the terms of that agreement. Hertz's bid valued Dollar Thrifty at $1.2 billion, when it was announced in April. However, Dollar Thrifty said in early May that it is willing to consider a takeover offer from Avis Budget Group, if it tops the offer made by Hertz.

Park Ridge, New Jersey-based Hertz said in late April that it has signed a definitive deal to buy Dollar Thrifty, which would give it a foothold in the leisure-rental market. Under the terms of the deal, the purchase price consists of 80% cash and 20% stock consideration.

Dollar Thrifty has scheduled a special meeting of shareholders on September 16, 2010 for a vote on the bid.

Earlier in the day, Avis Budget said it has sent a letter to the board of directors of Dollar Thrifty, saying that a combination of the two companies presented a "compelling opportunity" for both companies' stakeholders and the prospect for Dollar Thrifty shareholders to obtain the highest value for their investment. The company said its offer for Dollar Thrifty clearly constituted a "superior proposal" to that of Hertz.

Avis said that the cash portion of its offer will be funded through a combination of available cash and fully committed financing. The cash portion of the offer would include the proceeds of a pre-closing special dividend to be paid by Dollar Thrifty consistent with the Hertz offer.

Avis Budget added that it has received consents from the requisite percentage of lenders in its principal corporate credit facility to amend the terms of that facility to permit the completion of the proposed transaction, including its financing. The company noted that the stock portion of its offer does not require approval of its shareholders.

Avis said it is prepared to enter into a merger agreement that contains substantially the same terms as the Hertz merger agreement, but which includes removing the matching rights, eliminating the break-up fees, and increasing the commitment to secure antitrust approvals.

Car rental companies are slowly recovering from the recession, which battered demand from business and leisure customers. A merger would be a big consolidation in the car-rental industry that has struggled in recent years due to reduced travel budgets, falling used-car prices and large debt loads.

DTG closed Wednesday's regular trading session at $48.68, up $0.84 or 1.76% on a volume of 1.20 million shares, while CAR closed trading at $11.08, up $0.16 or 1.47% on a volume of 1.58 million shares.