Hertz (HTZ) Needs Big Bid, Luck to Land Dollar Thrifty (DTG)

May 15, 2012 9:56 AM EDT
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Dollar Thrifty (NYSE: DTG) shares are higher Tuesday morning amid speculation Hertz (NYSE: HTZ) will boost its takeover bid.

Earlier this month, Hertz said it agreed to material terms on the divestiture of its Advantage brand, a key hurdle in obtaining antitrust clearance for a Dollar Thrifty bid.

Since Hertz made its first effort in April 2010, Dollar Thrifty is going for near-record valuation relative to its sales numbers (1.49x versus a record 1.56x). At that level, Hertz would need to sell out $85 per share for Dollar Thrifty, according to Avondale Partners. Hertz originally offered $41 per share for the company with its initial bid. Last May, that bid moved up to $57.60 in cash and 0.8546 in Hertz shares -- equal to a total of $72 -- which fell as the year progressed, eventually being withdrawn last October.

With profits rising 126 percent and shares clearly doubling over the last two years, Hertz may need to make even more of an effort. In addition, Dollar Thrifty CEO Scott Thompson (no, not that one) said his company is executing a standalone plan, meaning it doesn't want to be bought out.

Dollar Thrift could draw over $90 per share, over a 13 percent premium to a closing at $79.98 Monday. Shares of Dollar are up 0.8 percent Tuesday.

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