April 15, 2024

DealBook: Once Vultures, Unwanted Suitors Now Seen as Strategists

A Hertz counter at the San Jose International Airport in California. Hertz offered $2.24 billion for Dollar Thrifty, a deal that is considered unsolicited, but a friendlier approach than that of other corporate suitors in recent months.Paul Sakuma/Associated PressA Hertz counter at the San Jose International Airport in California. Hertz offered $2.24 billion for Dollar Thrifty, a deal that is considered unsolicited, but a friendlier approach than that of other corporate suitors in recent months.

When it comes to deals, attitude matters.

On Monday, Hertz Global Holdings made a new bid for the Dollar Thrifty Automotive Group, offering $2.24 billion — a deal that trumps its earlier offer and a current proposal by the Avis Budget Group.

While the deal is considered unsolicited, Hertz is taking a friendlier approach than other corporate suitors in recent months, a stance that could help the car rental company win over the board of Dollar Thrifty. The company said on Monday that it would review the offer from Hertz.

“We believe that the acquisition of Dollar Thrifty by Hertz would be in the best interests of both companies’ shareholders and of rental car consumers, and that it will accelerate Hertz’s growth opportunities by leveraging the combined brand portfolio and unparalleled value and service reputations of both companies,” Mark P. Frissora, the chief executive of Hertz, said in a statement. “We have today made a superior bid.”

Other deal makers have been far more aggressive of late than Hertz.

After being rejected by Ralcorp Holdings, ConAgra Foods raised its offer for the company to $4.9 billion on May 4. It was rebuffed again.

With the NYSE Euronext committed to a $10.3 billion tie-up with Deutsche Börse, the Nasdaq OMX Group and the IntercontinentalExchange said they intended to take their $11 billion takeover offer for the owner of the Big Board directly to shareholders. If Nasdaq and ICE do put forth a formal offer to NYSE investors, it would be the first hostile deal this year, according to Thomson Reuters.

In some cases, deal makers make unsolicited offers as a way to force reluctant targets to the negotiating table. So far this year, 35 companies have made unfriendly bids, with volume topping $70 billion, based on Thomson Reuters data.

The stigma associated with such deals has dissipated over the years, says Paul T. Weisbrich, a senior managing director at McGladrey Capital Markets. While unwanted suitors were once seen as vultures, many are now seen as astute strategists.

“It has been evolutionary,” Mr. Weisbrich said.

The unsolicited deal for Hertz was about speed.

Hertz made a move for Dollar Thrifty in April 2010, offering $41 a share. A few months later, Avis swooped in with another proposal. Although the board of Dollar Thrifty backed a sweetened deal by Hertz in September, shareholders didn’t agree, paving the way for Avis to move forward.

But the plan by Avis, valued at roughly $1.8 billion now, has remained in flux as the two companies await regulatory approval from the Federal Trade Commission. In the beginning of 2011, the companies said they expected a decision by April. With the deadline past, the chief executive of Avis, Ronald L. Nelson, was more vague in May during an earnings call.

“Sometimes things take longer than one would like,” he said on the call. “While we aren’t ready to talk publicly about our discussions with the F.T.C., rest assured that we have been working hard on this front, and that we remain committed to acquiring” Dollar Thrifty.

Avis declined to comment.

Dollar Thrifty took a more ambiguous tone about the deal, following its earnings announcement. On May 5, the company’s chief executive, Scott L. Thompson, told analysts that it had no agreement, written or verbal, with Avis — and would consider potential offers “in light of the current facts and circumstances at the time.” He added that there was “no assurance any merger terms can be agreed upon in the future.”

Shortly thereafter, Hertz jumped back into the fray. Rather than hashing out new terms with Dollar Thrifty this time around, Hertz made an unsolicited bid to get a deal done faster, according to a person close to the company. On Sunday, Hertz called Mr. Thompson to alert him about the forthcoming offer, so as not to take him by surprise.

Hertz has also tried to pave the way with regulators, ramping up its dialogue with the F.T.C. several weeks ago. To help cement a deal, the car rental company said it was in the process of selling its Advantage brand. Several parties have already expressed interest in the unit, which generates roughly $250 million in revenue, according to the person close to the company.

By offloading Advantage, Hertz is hoping that its remaining businesses won’t overlap as much with Dollar Thrifty, making it an easier sell to regulators. Hertz has said it operates in the premium segment, while the Budget, Dollar and Thrifty brands tend to focus on the lower end of the market.

“We have always known that antitrust considerations would be pivotal in any transaction with Dollar Thrifty, and that a combination of Avis Budget and Dollar Thrifty would face serious antitrust obstacles,” Mr. Frissora said in a statement. “Avis Budget has been unable to produce a viable antitrust remedy, despite an entire year of discussions with the F.T.C. with no end in sight.”

Hertz’s cash-and-stock offer of $72 a share represents a 24 percent premium to the deal with Avis. It is also 26 percent more than Dollar Thrifty’s 90-day average stock price.

“We don’t want to get out ahead” of regulators, Mr. Frissora said in a call with analysts on Monday. “But we are aiming to close before the end of the third quarter.”

Hertz hired Lazard, Barclays Capital, Bank of America Merrill Lynch and Deutsche Bank Securities as financial advisers, and Cravath, Swaine Moore, Debevoise Plimpton and Jones Day as legal counsel.

JPMorgan Chase and Goldman Sachs are working with Dollar Thrifty as financial advisors, and Cleary Gottlieb Steen Hamilton is the legal counsel.

Chris V. Nicholson contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=75f556c70b1510b12c86e8be801f8553

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