April 26, 2010 6:54 PM
Three Firms in Driver's Seat on Hertz-Dollar Thrifty Tie-Up
Posted by Brian Baxter
Two of the largest names in the rental car business announced plans to merge late Sunday in a $1.2 billion cash and stock deal. Hertz Global Holdings will acquire Dollar Thrifty Automotive Group in a major strategic merger in the rental car industry. Debevoise & Plimpton, Jones Day, and Cleary Gottlieb Steen & Hamilton are advising on the transaction.
Debevoise M&A partners John "Jack" Allen, Jr., and Jonathan Levitsky led a team from the firm that included antitrust partner Daniel Abuhoff, finance partner William Beekman, and tax partner Gary Friedman. Debevoise previously advised three investment firms--The Carlyle Group, Merrill Lynch Global Private Equity, and Clayton Dubilier & Rice--that acquired Hertz from Ford for $5.6 billion in September 2005. (The acquisition closed that December.)
Allen then led a Debevoise team in November 2006 on an IPO for Park Ridge, N.J.-based Hertz. Hertz's private equity owners continued to hold more than half of the company. That stake will fall below 50 percent as a result of stock dilutions following completion of the merger with Dollar Thrifty.
Jones Day partners Joe Sims--a former American Lawyer Dealmaker of the Year--and Michael Knight are providing antitrust counsel to Hertz. The firm also has done work in the past for the company, representing Hertz in a U.S. Supreme Court case decided earlier this year over where a corporation can maintain its principal place of business.
Antitrust issues likely will loom large as Hertz moves forward on its proposed merger with Dollar Thrifty, especially in light of the Federal Trade Commission's new guidelines for horizontal mergers. As noted by The New York Times's Dealbook, the number of rental car companies in the U.S. has dropped from nine major companies to three over the past few years.
The industry's consolidation began in August 2002 when Avis acquired bankrupt Budget for a mere $107.5 million. Enterprise Rent-A-Car acquired Vanguard Car Rental--the parent of the National and Alamo rental chains--from private equity firm Cerberus Capital Management in March 2007, creating the largest rental car company in North America. Not wanting to be left behind, Hertz turned to Debevoise's Allen to beat out Enterprise for the assets of bankrupt Advantage Rent-A-Car for only $33 million in April 2009.
Now lawyers for Hertz are expected to argue that the company's tie-up with Dollar Thrifty will better allow it to compete with the likes of Avis and Enterprise in the rental car space. (Hertz is trying to branch out into the leisure rental car market, as opposed to focusing solely on business travelers.)
"We have hired lawyers that actually were former FTC people and feel good that we will get this deal done and that [regulatory approval] is not an issue," Hertz chairman and CEO Mark Frissora said in a conference call on Monday.
Cleary Gottlieb M&A partners Paul Shim and Matthew Salerno led a nearly 20-lawyer team from the firm advising Dollar Thrifty on the deal. Antitrust partners David Gelfand and Jeremy Calsyn, corporate finance and securities partner Janet Fisher, structured finance partner Andrea Podolsky, tax partners Sheldon Alster and Jason Factor, and employment counsel Kathleen Emberger also advised Dollar Thrifty on the acquisition.
The firm has previously handled stock offerings for Tulsa-based Dollar Thrifty, which was spun off from Chrysler in 1997. (The Chrysler relationship continued to hurt the company in recent years, as Dollar Thrifty had a long-term purchase contract with Chrysler to buy its cars.)
Simpson Thacher & Bartlett M&A partner John Finley led a team from the firm representing JPMorgan Chase and Goldman Sachs as financial advisers to Dollar Thrifty on the deal.
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