Hertz Will Pay $250 Million to Buy Leasing Firm Donlen
Hertz Global Holdings Inc. will acquire vehicle-fleet leasing and management company Donlen Corp. for $250 million, and is also assuming $680 million in debt, in a deal the two companies said they plan to announce Monday.
The deal is easily digestible for Hertz, which has a market capitalization of $6.2 billion, and isn't expected to affect its efforts to acquire Dollar Thrifty Automotive Group, said Hertz Chief Executive Mark Frissora.
In May, Hertz offered more than $2 billion for Dollar Thrifty, countering an about $1.7 billion bid from Avis Budget Group Inc. Both bids involve a combination of cash and stock, reported The Wall Street Journal.
The Donlen acquisition will give Hertz access to the long-term vehicle-leasing and fleet-management businesses, expanding the range of services Hertz can offer to its corporate customers. Based in Northbrook, Ill., privately held Donlen leases and manages more than 144,000 vehicles in the U.S., Canada and Mexico.
Donlen provides corporate customers technology that gives them real-time data on their vehicles and other services to manage their vehicle fleets.
Hertz has been increasing its technology-oriented services, such as virtual kiosks and Hertz On Demand, which allows customers to rent vehicles spontaneously and competes with short-term rental services such as Zipcar Inc.
Hertz has about 500,000 vehicles in its fleet in the U.S. and Europe, and about 800,000 vehicles total when including licensees.
"This fits in with our asset-light, technology-driven strategy," said Mr. Frissora in an interview. "We didn't offer vehicles on a yearly basis. and now we will have that ability with Donlen. So it's very complementary."
The deal has already been approved by the boards of directors of both companies and by Donlen's shareholders. The transaction is expected to close in the third quarter of this year.
Gary Rappeport, Donlen's chief executive, said in a statement: "There are a number of synergies between the two businesses that will allow us to expand and accelerate Donlen's offerings."
As for the Dollar Thrifty deal, both Hertz and Avis are continuing to work through the Federal Trade Commission antitrust review process. However, Avis has become less interested in Dollar Thrifty since it announced its acquisition of Avis Europe in June for $1 billion, according to people familiar with the matter.
Still, Avis could offer more stock to raise its Dollar Thrifty offer. It hasn't officially dropped its bid for the company.
The bidding war for Dollar Thrifty has been a long-running affair. In April 2010, Hertz and Dollar Thrifty had a $1.2 billion deal. But Avis came up with a higher bid, and a takeover battle ensued that resulted in Dollar Thrifty shareholders rejecting the Hertz deal at a meeting in September.
Avis had been going through the regulatory process when Hertz came back in May with a higher offer.
On Friday, Dollar Thrifty's stock closed at $73.23 per share on the New York Stock Exchange, giving it a market capitalization of $2.1 billion.
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