Hertz's Acquisition Of DTG A Positive Step
Hertz is paying a premium of 8% over DTG's Friday closing price.
- (1888PressRelease) August 29, 2012 - This is far more than the $41/share offer made in 2010. Thus, this is a far better win situation for DTG shareholders than for HTZ shareholders.
Hertz operates from 8,750 locations in 150 countries for its vehicle rental business segment and approximately 330 locations for the equipment rental business segment. The acquisition gives Hertz (a premium brand) access to two well known mid-tier and deep value brands of DTG: Dollar and Thrifty. The Dollar brand includes 260 locations in the U.S. and Canada, while Thrifty has 326 locations as of December 2011.
Hertz expects a cost saving benefit of $160 million per year (41% from fleet, 10% from procurement) due to greater productivity, and elimination of task duplication and efficiency, in addition to higher power over suppliers. Sales are also likely to grow faster considering the joint entity will now also have competitive advantages over its peers. The companies jointly control 37% of the U.S. airport market.
Hertz's sales were up 7.4%, according to the latest quarterly results, due to an increase in revenues from both car rental and equipment rental. Diluted EPS (adjusted) for Q22012 were a record $0.35/share, compared to $0.26 in Q22011. The company has a strong earnings surprise history to complement its 8.2% revenue growth and 17% long-term earnings growth.
Source URL: http://seekingalpha.com/article/829971-hertz-s-acquisition-of-dtg-a-positive-step
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