NEW YORK — Hertz Global Holdings, the world's largest car rental company, said Monday it has agreed to buy rival Dollar Thrifty Automotive Group for almost $1.2 billion in cash and stock.
Hertz said the deal will give it an additional 1,550 additional locations, boosting its total to 9,800. It said it will boost its leisure rental business in Europe and elsewhere.
Hertz said its bid values Tulsa's Dollar Thrifty at $41 per share, a 5.5 percent premium to Friday's closing price of $38.85. The offer is made up of 80 percent cash and 20 percent Hertz stock.
Recently, shares of Dollar Thrifty have been trading at their highest prices in almost three years. The stock was trading at $2 a little over year ago, and was valued at less than a dollar in early 2009 because of lower demand for rentals and falling resale prices for vehicles, along with the problems facing its main supplier, Chrysler.
Dollar Thrifty shares rose $3.33, or 8.6 percent, to $42.18 in morning trading Monday — 4 percent above the offered price. Its shares rose to a 52-week high of $42.60 earlier in the session.
Hertz shares also rose, gaining $2.23, or 17.3 percent, to $15.11 after rising to a 52-week high of $15.60. As Hertz shares rise, so does the stock component of its offer for Dollar Thrifty.
The deal is subject to approval by Dollar Thrifty shareholders and regulatory clearance.
Under the proposal, Dollar Thrifty will become a wholly owned unit of Hertz when the deal closes. Hertz, based in Park Ridge, N.J., expects the deal to start adding to profits immediately, and said it has already identified at least $180 million in potential cost cuts from combining the two businesses.
Hertz separately reported a smaller first-quarter loss. The company trimmed its loss to $150.4 million, or 37 cents per share, from $163.5 million, or 51 cents per share, a year ago. Excluding one-time costs Hertz said it lost 12 cents per share. Revenue rose 6 percent to $1.66 billion from $1.56 billion.
Analysts expected a loss of 13 cents per share and $1.62 billion in revenue, according to Thomson Reuters. Analyst estimates usually exclude one-time costs.
Hertz said U.S. rental car revenue rose 10 percent due to higher prices, an increase in business travel, and better results for its Advantage leisure brand.
Hertz is now expecting an adjusted profit of 43 cents to 45 cents per share in 2010, on $7.5 billion to $7.7 billion in revenue. It had forecast a profit of 37 cents to 39 cents per share excluding one-time items, on $7.4 billion to $7.6 billion in revenue.
Analysts had forecast 44 cents per share and $7.45 billion in revenue.