The remarks came with Dollar Thrifty's second-quarter earnings release. Dollar Thrifty said that neither Hertz nor any other company (read: Avis Budget Group Inc.) has made an acquisition offer during 2012. The value car rental company also said that reports that Hertz has been in discussion with the Federal Trade Commission to divest certain of Dollar Thrifty's assets in the context of a hypothetical transaction has led to difficulties in negotiating business partnerships and a loss of employees. Dollar Thrifty said it has communicated its concerns regarding these reported divestiture commitments to senior officials at the FTC.
The FTC declined to comment.
After three years of merger-related activity and speculation, Dollar Thrifty said it is time for a compelling offer to be made or for this process to come to a close.
Hertz declined to comment on the remarks.
On its conference call Tuesday, Hertz said that it continued to engage with the FTC regarding the antitrust clearance to potentially acquire Dollar Thrifty, but for regulatory reasons it could not comment further.
What regulatory restrictions the company is under are uncertain. The FTC would not restrict the company's ability to communicate with investors and Hertz does not have a tender offer or other live filing with the Securities and Exchange Commission. It is possible that communications, particularly written communications, prior to a resumed tender offer might require the company to commence filings under a schedule tender offer and Hertz prefers to avoid that at this juncture. Also, prudence dictates that making statements regarding specifics of a proposal could backfire if the terms or timing of a deal materially differed from the remarks.
Hertz did disclose in its last 10-Q in May that it was working toward a "final consent order" with the FTC staff. The process remains at that stage, a source said.
There has been some concern that if Hertz has not resumed a formal process for securing antitrust approval, the FTC will not finalize a consent order and clear a hypothetical deal.
Hertz and Dollar Thrifty filed for antitrust clearance for their April 2010 merger agreement, but that deal was shot down by shareholders after Avis made a spoiler offer, which was later aborted. Hertz also filed for its later unsolicited tender offer, which was withdrawn in October 2010 while a second request was under way. One source said the formal filing under Hart-Scott-Rodino was not a relevant matter and that Dollar Thrifty could expedite the review if it chose by confirming with the FTC that it remains open to a merger with Hertz.
One reading of the Dollar Thrifty plea Wednesday is that it is telling the FTC that it's open to a revised offer and wants the antitrust process concluded. It is clear from the remarks that Dollar Thrifty remains not only open to a merger with Hertz, but that it is waiting for Hertz to make the next approach. During the Q&A for its earnings, Dollar Thrifty was asked if it could quantify the harm it has encountered because of the unresolved approach by Hertz. The company responded that it could not peg a number to the issue, but that aside from employee loss and negotiations with strategic partners, it has slowed down Dollar Thrifty's decision process regarding returning cash to shareholders as the company waits out the process. That shows that Dollar Thrifty's board is operating under the assumption that a new deal can be reached.
When Hertz pulled its offer in October 2011 to "focus on antitrust," it said it would reassess the appropriate price and other terms of the proposed transaction based on Dollar Thrifty's share repurchase program, performance and prevailing market conditions. At that time, Dollar Thrifty had proposed a $100 million share repurchase that it concluded in February of this year. The company also since has purchased about $22 million worth of shares and has board approval to repurchase up to another $273 million, according to Wednesday's earnings release.
Dollar Thrifty shares dropped Wednesday by about $2.70, or 3.6%, to $71.70, at a premium of $4.70, or 6.6%, to the last Hertz proposal, which Wednesday was worth $67.10 in cash and shares.
Todd P. Kelly joined the Dallas Office of Jones Day as a partner in the healthcare and life sciences practice. For other updates launch today's Movers & shakers slideshow.
The Jordan Co. managing director talks about manufacturing M&A with private equity senior editor Jonathan Marino. More video