As filed with the Securities and Exchange Commission on May 9, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Hertz Global Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
|
DELAWARE
|
7514
|
20-3530539
|
| (State or Other Jurisdiction of
Incorporation or Organization)
|
(Primary Standard Industrial Classification
Code Number)
|
(I.R.S. Employer
Identification Number)
|
225 Brae Boulevard
Park Ridge, New Jersey 07656-0713
(201) 307-2000
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
J. Jeffrey Zimmerman, Esq.
Senior Vice President, General Counsel and Corporate Secretary
Hertz Global Holdings, Inc.
225 Brae Boulevard
Park Ridge, New Jersey 07656-0713
(201) 307-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
|
Copies to:
|
|
Scott A. Barshay, Esq.
Minh Van Ngo, Esq.
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
|
John M. Allen, Jr., Esq.
Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
(212) 909-6000
|
Approximate date of commencement of proposed sale of securities to the public: Pursuant to Rule 162 under the Securities Act, the offer described herein will commence as soon as practicable after the date of this Registration Statement. The offer cannot, however, be completed prior to the time this Registration Statement becomes effective. Accordingly, any actual sale or purchase of securities pursuant to the offer will occur only after this Registration Statement is effective, subject to the conditions set forth in this Registration Statement.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer x
|
Accelerated filer o
|
Non-accelerated filer o
(Do not check if a smaller reporting
company)
|
Smaller reporting company o
|
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o
CALCULATION OF REGISTRATION FEE
|
Title of Each Class of
Securities to be Registered
|
Amount to be Registered(1)
|
Proposed Maximum Offering Price per Unit
|
Proposed Maximum Aggregate Offering Price(2)
|
Amount of
Registration Fee(3)
|
||||||||||
|
Common Stock, par value $0.01 per share
|
26,078,436 | N/A | $ | 349,020,753 | $ | 40,521 | ||||||||
|
(1)
|
Represents the maximum number of shares of Hertz Global Holdings, Inc. common stock that can be issued in the exchange offer and second-step merger.
|
|
(2)
|
Pursuant to Rule 457(c) and Rule 457(f) under the Securities Act, and solely for the purpose of calculating the registration fee, the market value of the securities to be received was calculated as the product of (i) 31,332,182 shares of Dollar Thrifty Automotive Group, Inc. common stock (the sum of (w) 28,929,182 shares of Dollar Thrifty Automotive Group, Inc. common stock outstanding, (x) 2,190,000 shares of Dollar Thrifty Automotive Group, Inc. common stock issuable upon the exercise of outstanding options, (y) 140,000 shares of Dollar Thrifty Automotive Group, Inc. common stock issuable upon conversion of performance share and unit awards and (z) 73,000 shares of Dollar Thrifty Automotive Group, Inc. common stock issuable upon conversion of restricted stock units (as reported in Dollar Thrifty Automotive Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011), less 472,699 shares of Dollar Thrifty Automotive Group, Inc. common stock owned by The Hertz Corporation, a wholly owned subsidiary of Hertz Global Holdings, Inc.) and (ii) the average of the high and low sales prices of Dollar Thrifty Automotive Group, Inc. common stock as reported on the New York Stock Exchange on May 3, 2011 ($68.91), minus $1,777,506,221, the estimated maximum aggregate amount of cash to be paid by Hertz Global Holdings, Inc. in the offer and second-step merger in exchange for such securities.
|
|
(3)
|
Calculated as the product of the maximum aggregate offering price and 0.00011610.
|
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information contained in this prospectus/offer to exchange may be changed. Hertz Global Holdings, Inc. and HDTMS, Inc. may not complete the exchange offer and issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus/offer to exchange is not an offer to sell these securities and Hertz and HDTMS, Inc. are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
DATED MAY 9, 2011
Offer to Exchange
Each Outstanding Share of Common Stock
of
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
for
$57.60 in Cash and
0.8546 Shares of Common Stock of Hertz Global Holdings, Inc.
by
HDTMS, INC.,
a wholly owned subsidiary of
HERTZ GLOBAL HOLDINGS, INC.
HDTMS, Inc., a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of Hertz Global Holdings, Inc., a Delaware corporation (“Hertz”), is offering, upon the terms and subject to the conditions set forth in this prospectus/offer to exchange and in the accompanying letter of transmittal, to exchange each of the issued and outstanding shares of common stock, par value $0.01 per share (“Dollar Thrifty common stock”), of Dollar Thrifty Automotive Group, Inc., a Delaware corporation (“Dollar Thrifty”), for (i) $57.60 in cash, without interest and less any required withholding taxes, and (ii) 0.8546 shares of common stock, par value $0.01 per share, of Hertz (“Hertz common stock”). In addition, you will receive cash in lieu of any fractional shares of Hertz common stock to which you may otherwise be entitled.
Hertz’s and Purchaser’s obligation to accept for exchange, and to exchange, shares of Dollar Thrifty common stock for shares of Hertz common stock is subject to conditions which are described in the section of this prospectus/offer to exchange entitled “The Exchange Offer—Conditions of the Offer” beginning on page 57.
THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JULY 8, 2011, OR THE “EXPIRATION DATE,” UNLESS EXTENDED. SHARES TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER TO EXCHANGE, BUT NOT DURING ANY SUBSEQUENT OFFERING PERIOD.
Hertz common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “HTZ.” Dollar Thrifty common stock trades on the NYSE under the symbol “DTG.”
FOR A DISCUSSION OF RISKS AND OTHER FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE OFFER, PLEASE CAREFULLY READ THE SECTION OF THIS PROSPECTUS/OFFER TO EXCHANGE ENTITLED “RISK FACTORS” BEGINNING ON PAGE 17.
Neither Hertz nor Purchaser has authorized any person to provide any information or to make any representation in connection with the offer other than the information contained or incorporated by reference in this prospectus/offer to exchange, and if any person provides any of this information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by Hertz or Purchaser.
HERTZ IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY TO HERTZ.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus/offer to exchange. Any representation to the contrary is a criminal offense.
The dealer manager for the offer is:
 Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019
Toll Free: (888) 610-5877
|
The date of this prospectus/offer to exchange is May 9, 2011
Page
|
8
|
|
THIS PROSPECTUS/OFFER TO EXCHANGE INCORPORATES BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT HERTZ AND DOLLAR THRIFTY FROM DOCUMENTS THAT EACH COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, REFERRED TO AS THE “SEC,” BUT WHICH HAVE NOT BEEN INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS/OFFER TO EXCHANGE.
THIS INFORMATION IS AVAILABLE AT THE INTERNET WEB SITE THE SEC MAINTAINS AT WWW.SEC.GOV, AS WELL AS FROM OTHER SOURCES. SEE THE SECTION OF THIS PROSPECTUS/OFFER TO EXCHANGE ENTITLED “WHERE YOU CAN FIND MORE INFORMATION.” YOU ALSO MAY REQUEST COPIES OF THESE DOCUMENTS FROM HERTZ, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO HERTZ’S INFORMATION AGENT AT ITS ADDRESS OR TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS PROSPECTUS/OFFER TO EXCHANGE. IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST MAKE YOUR REQUEST NO LATER THAN JUNE 30, 2011, OR FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE, WHICHEVER IS LATER.
Below are some of the questions that you as a holder of shares of Dollar Thrifty Automotive Group, Inc., or “Dollar Thrifty,” common stock may have regarding the offer and answers to those questions. The answers to these questions do not contain all information relevant to your decision whether to tender your shares of Dollar Thrifty common stock, and Hertz Global Holdings, Inc., or “Hertz,” and HDTMS, Inc., or “Purchaser,” and together “we,” “us” or “our,” urge you to read carefully the remainder of this prospectus/offer to exchange and the accompanying letter of transmittal.
Who is offering to buy my shares of Dollar Thrifty common stock?
The offer is made by HDTMS, Inc., a Delaware corporation and wholly owned subsidiary of Hertz Global Holdings, Inc., a Delaware corporation. Hertz owns what it believes is the largest worldwide airport general use car rental brand, operating from approximately 8,500 locations in approximately 150 countries as of March 31, 2011. The Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental services and products. Hertz also rents equipment through approximately 320 branches in the United States, Canada, France, Spain, Italy, China and Saudi Arabia, as well as through its international licensees. Hertz and its predecessors have been in the car rental business since 1918 and in the equipment rental business since 1965.
What are the classes and amounts of Dollar Thrifty securities Hertz is offering to exchange in the offer?
We are seeking to acquire all issued and outstanding shares of common stock, par value $0.01 per share, of Dollar Thrifty.
What will I receive for my shares of Dollar Thrifty common stock?
In exchange for each share of Dollar Thrifty common stock you validly tender and do not properly withdraw before the expiration date, you will receive (i) $57.60 in cash, without interest and less any required withholding taxes, and (ii) 0.8546 shares of Hertz common stock. In addition, you will receive cash in lieu of any fractional shares of Hertz common stock to which you may otherwise be entitled.
Solely for purposes of illustration, the following table sets forth the value of the cash and Hertz common stock you will receive in the offer in exchange for each share of Dollar Thrifty common stock you validly tender and do not properly withdraw before the expiration date at different assumed market prices of Hertz common stock (without giving effect to any required withholding taxes):
|
Assumed Market Price of
Hertz Common Stock
|
Assumed Value of 0.8546
Shares of Hertz Common
Stock
|
Cash Consideration per
Share of Dollar Thrifty
Common Stock
|
Value of Cash and Stock
Consideration per Share of
Dollar Thrifty Common
Stock
|
|||||||||||
| $ | 15.85 | $ | 13.55 | $ | 57.60 | $ | 71.15 | |||||||
| $ | 16.85 | $ | 14.40 | $ | 57.60 | $ | 72.00 | |||||||
| $ | 17.85 | $ | 15.25 | $ | 57.60 | $ | 72.85 | |||||||
The market prices of Hertz common stock used in the above table are for purposes of illustration only. The price of Hertz common stock fluctuates and may be higher or lower than the prices assumed in these examples at the time shares of Dollar Thrifty common stock are exchanged pursuant to this offer. Each $1.00 increase or decrease in the market value of Hertz common stock corresponds to an increase or decrease, respectively, of $0.85 to the value of the cash and stock consideration you will receive in the offer in exchange for each share of Dollar Thrifty common stock you validly tender and do not properly withdraw. On May 6, 2011, the last trading date prior to the date of this prospectus/offer to exchange, the closing price of a share of Hertz common stock was $16.85. Stockholders are encouraged to obtain current market quotations for shares of Dollar Thrifty and Hertz common stock prior to making any decision with respect to the offer.
For more information, see “Risk Factors.”
Will I have to pay any fee or commission to exchange shares of Dollar Thrifty common stock?
If you are the record owner of your shares and you directly tender your shares to us in the offer, you will not have to pay any brokerage fees, commissions or similar expenses. If you own your shares through a broker, dealer, bank, trust company or other nominee and your broker, dealer, bank, trust company or other nominee tenders your shares on your behalf, your broker, dealer, bank, trust company or other nominee may charge a fee for doing so. You should consult your broker, dealer, bank, trust company or other nominee to determine whether any charges will apply.
Why is Hertz making this offer?
The purpose of the offer is for Hertz to acquire control of Dollar Thrifty and ultimately all of the outstanding shares of Dollar Thrifty common stock. The offer, as the first step in the acquisition of Dollar Thrifty, is intended to facilitate the acquisition of Dollar Thrifty as promptly as practicable. Hertz intends, promptly after completion of the offer, to consummate a second-step merger of Purchaser (or another wholly owned subsidiary of Hertz) with and into Dollar Thrifty (the “second-step merger”). The purpose of the second-step merger is to acquire all of the issued and outstanding shares of Dollar Thrifty common stock not exchanged pursuant to the offer. Pursuant to the terms of the second-step merger, each remaining issued and outstanding share of Dollar Thrifty common stock (other than shares owned by Hertz or any Dollar Thrifty or Hertz wholly owned subsidiary or held by Dollar Thrifty stockholders who perfect appraisal rights under Delaware law, to the extent available) will be converted into the same amount of cash and fraction of a share of Hertz common stock as exchanged in the offer, plus cash in lieu of any fractional shares of Hertz common stock. For more information, see “The Exchange Offer—Purpose and Structure of the Offer.”
What are the benefits of a combination of Hertz and Dollar Thrifty?
Hertz believes that the combination of Hertz’s and Dollar Thrifty’s businesses will create significant value for both Hertz’s and Dollar Thrifty’s current stockholders. We believe the combination of Hertz and Dollar Thrifty is a compelling combination with a number of strategic benefits, including the following:
|
|
●
|
Global Leader—The combination of Hertz and Dollar Thrifty would create a global, multi-brand rental car leader able to offer customers a full range of rental options through its market leading brands. The combined company would have leadership positions in many key car rental markets around the world, with significant growth opportunities based on the combined brand portfolio and its unparalleled value and premium offerings.
|
|
|
●
|
Growth Opportunities—A combination of Hertz and Dollar Thrifty is expected to accelerate revenue and earnings growth for the combined company over time. In particular, the acquisition of Dollar Thrifty would help accelerate Hertz’s leisure rental strategy in Europe and other markets. The combined company should also be able to compete even more effectively and efficiently against other multi-brand car rental companies while expanding the value-focused leisure brands.
|
|
|
●
|
Comprehensive Brand Positioning—Hertz believes that a combination of Hertz and Dollar Thrifty will enable Hertz to achieve growth in the leisure travel and the value-priced rental vehicle segments with distinct value/leisure brands while also maintaining the focus of the Hertz brand as the preeminent premium car rental brand in the United States and abroad.
|
|
|
●
|
Operational Benefits—Hertz believes there is potential for meaningful savings through improved fleet procurement and management as a result of consolidation of Hertz’s and Dollar Thrifty’s fleets and integration of information technology and other functions.
|
|
|
●
|
Profitability—Hertz anticipates that the offer and second-step merger will be accretive to its annual earnings per share of common stock in the first full year following consummation of the transactions.
|
|
|
●
|
Enhanced Capital Markets Presence—The combined company will be the largest publicly traded rental car company in the world with increased trading liquidity on the NYSE. We believe the combined company will have an enhanced capital markets presence and greater long-term financial stability and access to financial resources than any other publicly traded rental car company in the world.
|
|
|
●
|
Attractive Diversification—The combined company and its stockholders will benefit from increased diversification across the premium and value segments of the rental car industry. The addition of Dollar Thrifty to Hertz’s existing brand portfolio would complement Hertz’s existing position in the car rental market by adding a value brand that is associated with the leisure travel and value-priced rental vehicle segments.
|
For more information, see “Background and Reasons for the Offer—Reasons for the Offer.”
What does the Dollar Thrifty board of directors think of the offer?
As of the date of this prospectus/offer to exchange, the Dollar Thrifty board of directors has not taken a position with respect to the offer. No later than 10 business days from the date the offer is first published, sent or given, Dollar Thrifty is required by applicable law to publish, send or give to you (and file with the SEC) a statement as to whether it recommends acceptance or rejection of the offer, expresses no opinion and remains neutral toward the offer or is unable to take a position with respect to the offer.
Have you discussed the offer with the Dollar Thrifty board of directors?
As of the date of this prospectus/offer to exchange, Hertz has not discussed the offer with the Dollar Thrifty board of directors. On May 8, 2011, Hertz’s Chairman and Chief Executive Officer, Mark P. Frissora, informed Dollar Thrifty’s Chief Executive Officer and director, Scott L. Thompson, over the phone that Hertz intended to announce a cash/stock exchange offer for Dollar Thrifty common stock the next day. Mr. Frissora also explained to Mr. Thompson that Hertz is seeking a friendly and cooperative transaction between Hertz and Dollar Thrifty.
Will U.S. taxpayers be taxed on the Hertz common stock and cash received in the offer or second-step merger?
The exchange of Dollar Thrifty common stock pursuant to the offer or second-step merger will be a taxable transaction for U.S. Federal income tax purposes. Accordingly, a U.S. Holder (as defined in “The Exchange Offer—Material Federal Income Tax Consequences”) of Dollar Thrifty common stock who receives Hertz common stock and cash in exchange for such U.S. Holder’s shares of Dollar Thrifty common stock generally will recognize taxable gain or loss in an amount equal to the difference, if any, between the fair market value of the Hertz common stock and cash received and such U.S. Holder’s adjusted tax basis in the shares of Dollar Thrifty common stock exchanged therefor.
For more information, see “The Exchange Offer—Material Federal Income Tax Consequences.”
Hertz and Purchaser urge you to contact your own tax advisor to determine the particular tax consequences to you as a result of the offer and/or the second-step merger.
What are the conditions of the offer?
The offer is conditioned upon, among other things, the following:
|
|
●
|
Minimum Tender Condition—Dollar Thrifty stockholders shall have validly tendered and not properly withdrawn prior to the expiration of the offer a number of shares of Dollar Thrifty common stock which, together with Dollar Thrifty shares then owned by Hertz and its subsidiaries (including Purchaser), represents at least a majority of the then outstanding shares of Dollar Thrifty common stock on a fully diluted basis.
|
|
|
●
|
Section 203 Condition—Dollar Thrifty’s board of directors shall have approved the offer and second-step merger under Section 203 of the Delaware General Corporation Law, as amended (the “DGCL”), or Hertz shall be satisfied, in its sole discretion, that Section 203 of the DGCL is inapplicable to the offer and second-step merger.
|
|
|
●
|
Competition Condition—The waiting periods applicable to the offer and second-step merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), and the no-close period (including any extensions thereof) applicable to the offer and second-step merger under the Competition Act (Canada) shall have, in each case, expired or been waived or terminated.
|
|
|
●
|
Registration Statement Condition—The registration statement of which this prospectus/offer to exchange is a part shall have been declared effective by the SEC under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the registration statement shall have been issued by the SEC and no proceeding for that purpose shall have been initiated or threatened by the SEC.
|
|
|
●
|
NYSE Listing Condition—The shares of Hertz common stock to be issued pursuant to the offer and second-step merger shall have been approved for listing on the NYSE, subject to official notice of issuance.
|
|
|
●
|
Injunction Condition—No temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction or other statute, law, rule, legal restraint or prohibition shall be in effect that restrains, enjoins, prohibits or otherwise makes illegal the consummation of the offer and the other transactions contemplated by this prospectus/offer to exchange.
|
See “The Exchange Offer—Conditions of the Offer” for additional conditions to the offer.
How long will it take to complete your proposed transaction?
The timing of completing the offer and second-step merger will depend on a variety of factors. We announced the offer to facilitate the acquisition of Dollar Thrifty as promptly as practicable.
The offer and second-step merger are subject to certain regulatory requirements, including expiration or termination of the applicable HSR Act and Competition Act (Canada) waiting periods (see “The Exchange Offer—Regulatory Approvals; Certain Other Legal Matters”). The waiting period under the Competition Act (Canada) with regard to Hertz’s prior agreement to acquire Dollar Thrifty pursuant to the Agreement and Plan of Merger, dated as of April 25, 2010 (the “2010 Merger Agreement”), by and among Dollar Thrifty, Hertz, and Purchaser, expired on June 21, 2010, and the Canadian Commissioner of Competition (the “Canadian Competition Commissioner”) issued a no-action letter on July 27, 2010, stating that she did not intend to challenge the proposed transaction. That no-action letter will expire on May 21, 2011, unless extended by the Canadian Competition Commissioner. Hertz expects to be able to extend the no-action letter during the pendency of the offer or to otherwise comply with the notification requirements under the Competition Act (Canada). Hertz is engaged in discussions with the Federal Trade Commission and has started a process for the divestiture of its Advantage brand. Hertz is working to secure a path towards accelerated antitrust approval in the United States. There can be no assurance, however, that the Canadian Competition Commissioner’s no-action letter will be extended, or that the waiting period under the HSR Act will expire or be terminated on an accelerated basis.
Do I have to vote to approve the offer or second-step merger?
No. Your vote is not required. You simply need to tender your shares if you choose to do so. However, the offer can only be completed if Hertz or Purchaser (or another direct or indirect wholly owned subsidiary of Hertz), among other things, acquires a number of shares of Dollar Thrifty common stock which, together with the Dollar Thrifty shares then owned by Hertz and its subsidiaries (including Purchaser), represents at least a majority of the then outstanding shares of Dollar Thrifty common stock on a fully diluted basis.
Both the board of directors of Dollar Thrifty and Dollar Thrifty stockholders will be required to approve the second-step merger, unless the Section 203 condition is satisfied and we acquire at least 90% of the outstanding Dollar Thrifty common stock in the offer or otherwise, in which case, we will be able to consummate the second-step merger as a “short-form” merger pursuant to Section 253 of the DGCL without the approval of the board of directors of Dollar Thrifty or the Dollar Thrifty stockholders.
Any solicitation of proxies or consents from Dollar Thrifty stockholders to approve the second-step merger will be made only pursuant to separate materials complying with the requirements of the rules and regulations of the SEC.
Is Hertz’s financial condition relevant to my decision to tender shares of Dollar Thrifty common stock in the offer?
Yes. Hertz’s financial condition is relevant to your decision to tender your shares of Dollar Thrifty common stock because part of the consideration you will receive if your shares of Dollar Thrifty common stock are exchanged in the offer will consist of shares of Hertz common stock. You should therefore consider Hertz’s financial condition before you decide to become one of Hertz’s stockholders through the offer. You also should consider the possible effect that Hertz’s acquisition of Dollar Thrifty will have on Hertz’s financial condition. This prospectus/offer to exchange contains financial information regarding Hertz and Dollar Thrifty, as well as pro forma financial information (which does not reflect any of our expected synergies) for the proposed combination of Hertz and Dollar Thrifty, all of which we encourage you to review. For more information, see “The Exchange Offer—Financing of the Offer; Source and Amount of Funds.”
Does Hertz have the financial resources to complete the offer and second-step merger?
The offer is not subject to any financing condition or contingency.
Hertz, Purchaser’s parent company, will provide Purchaser with sufficient funds to consummate the offer and second-step merger. Hertz intends to provide Purchaser with the necessary funds from cash on hand, borrowings under bank credit facilities and/or the issuance of debt securities. We estimate that the total amount of cash required to complete the transactions contemplated by the offer and second-step merger, including payment of any fees, expenses and other related amounts incurred in connection with the offer and second-step merger and the refinancing of a portion of Dollar Thrifty’s outstanding indebtedness, will be approximately $1.9 billion (exclusive of fees and expenses related to new borrowings and/or issuances of debt securities in connection with the offer and second-step merger and exclusive of any cash and cash equivalents available from Dollar Thrifty).
The estimated amount of cash required is based on Hertz’s due diligence review of Dollar Thrifty’s publicly available information to date, and is subject to change. For a further discussion of the risks relating to Hertz’s limited due diligence review, see “Risk Factors—Risk Factors Relating to the Offer and Second-Step Merger.”
For additional details on the proposed financing, see “The Exchange Offer—Financing of the Offer; Source and Amount of Funds.”
What percentage of Hertz common stock will former holders of Dollar Thrifty common stock own after the offer?
Based on certain assumptions regarding the number of Dollar Thrifty shares to be exchanged and the number of Hertz shares that will be outstanding, Hertz estimates that if all shares of Dollar Thrifty common stock are exchanged pursuant to the offer and second-step merger, former Dollar Thrifty stockholders would own, in the aggregate, approximately 5.6% of the outstanding shares of Hertz common stock. For a detailed discussion of the assumptions on which this estimate is based, see “The Exchange Offer—Ownership of Hertz After the Offer.”
When does your offer expire?
The offer is scheduled to expire at 12:00 midnight, New York City time, on July 8, 2011, which is the initial expiration date, unless further extended by Purchaser. When we make reference to “the expiration of the offer” or the “expiration date” anywhere in this prospectus/offer to exchange, this is the time to which we are referring, including, if extended, any later time that may apply. For more information, see “The Exchange Offer—Extension, Termination and Amendment.”
Can the offer be extended and, if so, under what circumstances?
Purchaser may, in its sole discretion, extend the offer at any time or from time to time until 9:00 a.m., New York City time, on the first business day after the previously scheduled expiration date. For instance, the offer may be extended if any of the conditions specified in “The Exchange Offer—Conditions of the Offer” are not satisfied prior to the scheduled expiration date of the offer. Purchaser may also elect to provide a “subsequent offering period” for the offer. A subsequent offering period would not be an extension of the offer. Rather, a subsequent offering period would be an additional period of time, beginning after Purchaser has accepted for exchange all shares tendered during the offer, during which stockholders who did not tender their shares in the offer may tender their shares and receive the same consideration provided in the offer. We do not currently intend to include a subsequent offering period, although we reserve the right to do so. For more information, see “The Exchange Offer—Extension, Termination and Amendment.”
Any decision to extend the offer will be made public by announcement regarding such extension as described under “The Exchange Offer—Extension, Termination and Amendment.”
Prior to the consummation of the offer, do you intend to undertake a proxy solicitation and/or a consent solicitation to replace some or all of Dollar Thrifty’s directors with your nominees for directors?
No. We do not intend to nominate, or solicit proxies for the election of, a slate of nominees for election at any meeting of Dollar Thrifty stockholders prior to the consummation of the offer; nor do we intend to solicit written consents from the stockholders of Dollar Thrifty to replace some or all of Dollar Thrifty’s directors prior to the consummation of the offer. We are seeking a consensual business combination with Dollar Thrifty.
After the offer is consummated, do you intend to replace some or all of Dollar Thrifty’s directors with your designees for directors?
Yes. We currently intend, as soon as practicable after consummation of the offer, to replace the Dollar Thrifty directors with our designees for directors.
How do I tender my shares?
To tender shares into the offer, you must deliver the certificates representing your shares, together with a completed letter of transmittal and any other required documents, to American Stock Transfer & Trust Company, LLC, the exchange agent for the offer, or tender such shares pursuant to the procedure for book-entry transfer set forth in “The Exchange Offer—Procedure for Tendering—Book-Entry Transfer,” not later than the expiration date. The letter of transmittal is enclosed with this prospectus/offer to exchange. If your shares are held in street name by your broker, dealer, bank, trust company or other nominee, such nominee can tender your shares through The Depository Trust Company.
If you cannot deliver everything required to make a valid tender to the exchange agent before the expiration of the offer, you may have a limited amount of additional time by having a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange, Inc. Medallion Signature Program (MSP), guarantee, pursuant to a Notice of Guaranteed Delivery, that the missing items will be received by the exchange agent within three New York Stock Exchange trading days. However, the exchange agent must receive the missing items within that three-trading-day period.
For a complete discussion on the procedures for tendering your shares, see “The Exchange Offer—Procedure for Tendering.”
Until what time can I withdraw tendered shares?
You can withdraw tendered shares at any time until the offer has expired, and, if we have not agreed to accept your shares for payment within 60 days after commencement of the offer, you can withdraw them at any time after such time until we accept shares for payment. You may not, however, withdraw shares tendered during a subsequent offering period, if one is included. For a complete discussion on the procedures for withdrawing your shares, see “The Exchange Offer—Withdrawal Rights.”
How do I withdraw tendered shares?
To withdraw tendered shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to the exchange agent while you have the right to withdraw shares. If you tendered shares by giving instructions to a broker, dealer, bank, trust company or other nominee, you must instruct the broker, dealer, bank, trust company or other nominee to arrange for the withdrawal of your shares and such broker, dealer, bank, trust company or other nominee must effectively withdraw such shares while you still have the right to withdraw shares. For a complete discussion on the procedures for withdrawing your shares, see “The Exchange Offer—Withdrawal Rights.”
When and how will I receive the offer consideration in exchange for my tendered shares?
Purchaser will exchange all validly tendered and not properly withdrawn shares promptly after the expiration date, subject to the terms of the offer and the satisfaction or waiver of the conditions to the offer, as set forth in the section of this prospectus/offer to exchange entitled “The Exchange Offer—Conditions of the Offer.” We will deliver the consideration for your validly tendered and not properly withdrawn shares of Dollar Thrifty common stock by depositing the cash and stock consideration therefor with the exchange agent, which will act as your agent for the purpose of receiving the offer consideration from us and transmitting such consideration to you. In all cases, an exchange of shares of Dollar Thrifty common stock that have been tendered and accepted for exchange will be made only after timely receipt by the exchange agent of (1) the certificates representing such shares or a confirmation of a book-entry transfer of such shares into the exchange agent’s account at The Depository Trust Company pursuant to the procedures set forth in “The Exchange Offer—Procedure for Tendering,” (2) the letter of transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent’s Message (as defined in “The Exchange Offer—Acceptance for Exchange, and Exchange, of Dollar Thrifty Shares; Delivery of Hertz Common Stock”) and (3) any other documents required under the letter of transmittal.
Will the offer be followed by a merger if all shares are not tendered in the offer?
If, pursuant to the offer, we accept for exchange and pay for at least that number of shares that, when added to shares then owned by Hertz or any of its subsidiaries, shall constitute a majority of the outstanding Dollar Thrifty shares on a fully diluted basis, we currently intend, as soon as practicable after consummation of the offer, to seek to have Dollar Thrifty consummate a merger or other similar business combination with Purchaser or another subsidiary of Hertz, pursuant to which each then outstanding share of Dollar Thrifty common stock not owned by Hertz or Purchaser (or our or Dollar Thrifty’s respective subsidiaries) or by Dollar Thrifty stockholders who perfect appraisal rights under Delaware law, to the extent available, would be converted into the right to receive the consideration paid in the offer. For more information, see “The Exchange Offer—Purpose and Structure of the Offer.”
If a majority of the shares are tendered and accepted for payment, will Dollar Thrifty continue as a public company?
If the second-step merger takes place, Dollar Thrifty will no longer be a separate publicly-traded company. Even if the second-step merger does not take place, if we exchange all the tendered shares, there may be so few remaining stockholders and publicly held shares that the shares will no longer be eligible to be traded on a securities exchange, there may not be a public trading market for the shares, and Dollar Thrifty may cease making filings with the SEC or otherwise cease being required to comply with the SEC rules relating to publicly held companies. For more information, see “The Exchange Offer—Effect of the Offer on the Market for Shares of Dollar Thrifty Common Stock; NYSE Listing; Registration Under the Exchange Act; Margin Regulations.”
If I decide not to tender, how will the offer affect my shares of Dollar Thrifty common stock?
If the offer is consummated and the second-step merger takes place, holders of Dollar Thrifty common stock (other than shares of Dollar Thrifty common stock owned by Hertz or any of its subsidiaries or held by Dollar Thrifty stockholders who perfect appraisal rights under Delaware law, to the extent available) not tendering in the offer will receive in the second-step merger the same consideration that they would have received had they tendered their shares in the offer. Therefore, if the second-step merger takes place and appraisal rights are not available or are not properly exercised by you, the key difference to you if you did not tender your shares in the offer is that you will receive consideration at a later date, and the Hertz common stock received on that later date may have a market price that is greater or less than the price of Hertz common stock on the date you would have received the consideration if you had tendered in the offer. However, if the offer is consummated and the second-step merger does not take place, the number of Dollar Thrifty stockholders and the number of shares of Dollar Thrifty common stock that are still in the hands of the public may be so small that there will no longer be an active public trading market, or, possibly, any public trading market, for these shares, which may affect the prices at which the shares trade. Also, Dollar Thrifty may cease making filings with the SEC or otherwise cease to be subject to the SEC rules relating to publicly held companies. For more information, see “The Exchange Offer—Effect of the Offer on the Market for Shares of Dollar Thrifty Common Stock; NYSE Listing; Registration Under the Exchange Act; Margin Regulations.”
Are dissenters’ or appraisal rights available in either the offer or second-step merger?
You do not have appraisal rights as a result of the offer. However, if the second-step merger is consummated, stockholders of Dollar Thrifty who do not tender their shares in the offer, continue to hold shares at the time of the consummation of the second-step merger, neither vote in favor of the second-step merger nor consent thereto in writing and otherwise comply with the applicable statutory procedures under Section 262 of the DGCL will be entitled to receive a judicial determination of the fair value of their shares (exclusive of any element of value arising from the accomplishment or expectation of the offer and second-step merger) and to receive payment of such fair value (all such shares, collectively, the “Dissenting Shares”). Because appraisal rights are not available in connection with the offer, no demand for appraisal under Section 262 of the DGCL may be made at this time. Any such judicial determination of the fair value of the Dissenting Shares could be based upon factors other than or in addition to the consideration paid in the offer and the market value of the shares. Holders of Dollar Thrifty common stock should recognize that the value so determined could be higher or lower than, or the same as, the consideration per share paid pursuant to the offer or the consideration paid in such a merger. Moreover, we may argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Dissenting Shares is less than the consideration paid in the offer.
Because of the complexity of Delaware law relating to appraisal rights, we encourage you to seek the advice of your own legal counsel. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. For more information, see “The Exchange Offer—Appraisal/Dissenters’ Rights.”
What is the market value of my shares of Dollar Thrifty common stock as of a recent date?
On May 6, 2011, the last trading day prior to the public announcement of our offer and the date of this prospectus/offer to exchange, the closing price of a share of Dollar Thrifty common stock was $69.69. You are encouraged to obtain a recent quotation for shares of Dollar Thrifty and Hertz common stock before deciding whether or not to tender your shares.
Where can I find more information on Hertz and Dollar Thrifty?
You can find more information about Hertz and Dollar Thrifty from various sources described in the section of this prospectus/offer to exchange entitled “Where You Can Find More Information.”
Whom can I talk to if I have questions about the offer?
You can call the information agent or the dealer manager for the offer.
The information agent for the offer is:
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders May Call Toll Free: (877) 456-3507
Banks and Brokers May Call Collect: (212) 750-5833
The dealer manager for the offer is:
|
|
|
Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019
Toll Free: (888) 610-5877
|
NOTE ON DOLLAR THRIFTY INFORMATION
Except as otherwise expressly set forth in this prospectus/offer to exchange, all information concerning Dollar Thrifty, its business, management and operations contained or incorporated by reference in this prospectus/offer to exchange has been taken from or based upon publicly available documents on file with the SEC and other public sources and is qualified in its entirety by reference thereto. This information may be examined and copies may be obtained at the places and in the manner set forth in the section entitled “Where You Can Find More Information.” Hertz is not affiliated with Dollar Thrifty, and, since the termination of the 2010 Merger Agreement, Hertz has not had access to Dollar Thrifty’s books and records. Therefore, non-public information concerning Dollar Thrifty was not available to Hertz for the purpose of preparing this prospectus/offer to exchange. Although Hertz has no knowledge that would indicate that statements relating to Dollar Thrifty contained or incorporated by reference in this prospectus/offer to exchange are inaccurate or incomplete, Hertz was not involved in the preparation of those statements and cannot verify them.
Pursuant to Rule 409 under the Securities Act and Rule 12b-21 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Hertz is requesting that Dollar Thrifty provide Hertz with information required for complete disclosure regarding the businesses, operations, financial condition and management of Dollar Thrifty. Hertz and Purchaser will amend or supplement this prospectus/offer to exchange to provide any and all information Hertz receives from Dollar Thrifty, if Hertz receives the information before Hertz’s and Purchaser’s offer to exchange expires and Hertz considers it to be material, reliable and appropriate.
An auditor’s report was issued on Dollar Thrifty’s financial statements and schedule and included in Dollar Thrifty’s filings with the SEC. Pursuant to Rule 439 under the Securities Act, Hertz and Purchaser require the consent of Dollar Thrifty’s independent auditors to incorporate by reference their audit report included in Dollar Thrifty’s Annual Report on Form 10-K for the year ended December 31, 2010 into this prospectus/offer to exchange. Hertz is requesting and has, as of the date hereof, not received such consent from Dollar Thrifty’s independent auditors. If Hertz receives this consent, Hertz and Purchaser will promptly file it as an exhibit to Hertz’s registration statement of which this prospectus/offer to exchange forms a part.
This summary highlights selected information from this prospectus/offer to exchange. To obtain a better understanding of the offer to holders of shares of Dollar Thrifty common stock, you should read this entire prospectus/offer to exchange carefully, as well as those additional documents to which we refer you. You may obtain the information incorporated by reference into this prospectus/offer to exchange by following the instructions in the section of this prospectus/offer to exchange entitled “Where You Can Find More Information.”
The Companies (See page 25)
Hertz
Hertz is a corporation incorporated in Delaware on July 15, 2005, with principal executive offices at 225 Brae Boulevard, Park Ridge, New Jersey 07656-0713. The telephone number of Hertz’s principal executive offices is (201) 307-2000.
Hertz owns what it believes is the largest worldwide airport general use car rental brand, operating from approximately 8,500 locations in approximately 150 countries as of March 31, 2011. The Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental services and products. Hertz operates both corporate and licensee locations in cities and airports in North America, Europe, Latin America, Australia, Asia and New Zealand. In addition, Hertz has licensee locations in cities and airports in Africa and the Middle East. Hertz also rents equipment through approximately 320 branches in the United States, Canada, France, Spain, Italy, China and Saudi Arabia, as well as through its international licensees. Hertz and its predecessors have been in the car rental business since 1918 and in the equipment rental business since 1965.
Purchaser
Purchaser is a Delaware corporation incorporated on April 23, 2010, with principal executive offices at 225 Brae Boulevard, Park Ridge, New Jersey 07656-0713. The telephone number of Purchaser’s principal executive offices is (201) 307-2000. Purchaser is a wholly owned subsidiary of Hertz that was formed to facilitate the transactions contemplated by the 2010 Merger Agreement. Purchaser has engaged in no activities to date and has no material assets or liabilities of any kind, in each case other than those incidental to its formation and its activities and obligations in connection with the 2010 Merger Agreement and the offer.
Dollar Thrifty
Dollar Thrifty is a corporation incorporated in Delaware on November 4, 1997, with principal executive offices at 5330 East 31st Street, Tulsa, Oklahoma 74135. The telephone number of Dollar Thrifty’s principal executive offices is (918) 660-7700.
Through its Dollar Rent A Car and Thrifty Car Rental brands, Dollar Thrifty has been serving value-conscious leisure and business travelers since 1950. Dollar Thrifty maintains a strong presence in domestic leisure travel in virtually all of the top United States and Canadian airport markets, and also derives a significant portion of its revenue from international travelers to the United States under contracts with various international tour operators. Dollar and Thrifty have approximately 300 corporate locations in the United States and Canada, with approximately 6,000 employees located mainly in North America. In addition to its corporate operations, Dollar Thrifty maintains global service capabilities through an expansive franchise network of approximately 1,275 franchises in 82 countries.
The Exchange Offer (See page 43)
Purchaser is offering to exchange each outstanding share of Dollar Thrifty common stock that is validly tendered and not properly withdrawn prior to the expiration date for (i) $57.60 in cash, without interest and less any required withholding taxes, and (ii) 0.8546 shares of Hertz common stock, upon the terms and subject to the conditions contained in this prospectus/offer to exchange and the accompanying letter of transmittal. Hertz will not issue any fractional shares of Hertz common stock pursuant to the offer. Instead, each tendering stockholder who would otherwise be entitled to a fractional share of Hertz common stock will receive cash in an amount (rounded to the nearest whole cent) equal to the product obtained by multiplying (i) the fractional share interest to which such holder would otherwise be entitled (rounded to the nearest ten thousandth when expressed in decimal form) by (ii) the per share closing price of Hertz common stock on the NYSE on the expiration date.
Reasons for the Offer (See page 41)
The advantages of a Hertz-Dollar Thrifty combination are compelling, and we believe a combination of these two companies creates superior value for the Dollar Thrifty and Hertz stockholders. In particular, we believe that the offer provides compelling value to Dollar Thrifty stockholders because, among other reasons:
|
|
●
|
Premium Offered to Dollar Thrifty Stockholders—The offer represents a 26% premium to Dollar Thrifty’s 90-day average closing share price and a 18% premium to Dollar Thrifty’s 60-day average closing share price (measured from May 6, 2011 and based on the closing stock price for Hertz on that date). These are substantial premiums, especially after taking into account the large takeover speculation premium that was already included in Dollar Thrifty’s stock price prior to our announcement of the offer.
|
|
|
●
|
Limited Conditions and Ready to Close Quickly—Our offer has limited conditions and we are ready to close a transaction with Dollar Thrifty as quickly as possible. Hertz is working to secure antitrust clearance on an accelerated basis. Our offer is also not subject to the approval of Hertz’s stockholders. We announced the offer to facilitate the acquisition of Dollar Thrifty as promptly as practicable.
|
We also believe the combination of Hertz and Dollar Thrifty is a compelling combination with a number of strategic benefits, including the following:
|
|
●
|
Global Leader—The combination of Hertz and Dollar Thrifty would create a global, multi-brand rental car leader able to offer customers a full range of rental options through its market leading brands. The combined company would have leadership positions in many key car rental markets around the world, with significant growth opportunities based on the combined brand portfolio and its unparalleled value and premium offerings.
|
|
|
●
|
Growth Opportunities—A combination of Hertz and Dollar Thrifty is expected to accelerate revenue and earnings growth for the combined company over time. In particular, the acquisition of Dollar Thrifty would help accelerate Hertz’s leisure rental strategy in Europe and other markets. The combined company should also be able to compete even more effectively and efficiently against other multi-brand car rental companies while expanding the value-focused leisure brands.
|
|
|
●
|
Comprehensive Brand Positioning—Hertz believes that a combination of Hertz and Dollar Thrifty will enable Hertz to achieve growth in the leisure travel and the value-priced rental vehicle segments with distinct value/leisure brands while also maintaining the focus of the Hertz brand as the preeminent premium car rental brand in the United States and abroad.
|
|
|
●
|
Operational Benefits—Hertz believes there is potential for meaningful savings through improved fleet procurement and management as a result of consolidation of Hertz’s and Dollar Thrifty’s fleets and integration of information technology and other functions.
|
|
|
●
|
Profitability—Hertz anticipates that the offer and second-step merger will be accretive to its annual earnings per share of common stock in the first full year following consummation of the transactions.
|
|
|
●
|
Enhanced Capital Markets Presence—The combined company will be the largest publicly traded rental car company in the world with increased trading liquidity on the NYSE. We believe the combined company will have an enhanced capital markets presence and greater long-term financial stability and access to financial resources than any other publicly traded rental car company in the world.
|
|
|
●
|
Attractive Diversification—The combined company and its stockholders will benefit from increased diversification across the premium and value segments of the rental car industry. The addition of Dollar Thrifty to Hertz’s existing brand portfolio would complement Hertz’s existing position in the car rental market by adding a value brand that is associated with the leisure travel and value-priced rental vehicle segments.
|
Hertz realizes that there can be no assurance about future results, including results considered or expected as described in the factors listed above, such as assumptions regarding potential synergies or other benefits to be realized following the offer and second-step merger. Hertz’s reasons for the offer and all other information in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements.”
Financing of the Offer; Source and Amount of Funds (See page 59)
The offer is not subject to any financing condition or contingency.
Hertz, Purchaser’s parent company, will provide Purchaser with sufficient funds to consummate the offer and second-step merger. Hertz intends to provide Purchaser with the necessary funds from cash on hand, borrowings under bank credit facilities and/or the issuance of debt securities. We estimate that the total amount of cash required to complete the transactions contemplated by the offer and second-step merger, including payment of any fees, expenses and other related amounts incurred in connection with the offer and second-step merger and the refinancing of a portion of Dollar Thrifty’s outstanding indebtedness, will be approximately $1.9 billion (exclusive of fees and expenses related to new borrowings and/or issuances of debt securities in connection with the offer and second-step merger and exclusive of any cash and cash equivalents available from Dollar Thrifty).
The estimated amount of cash required is based on Hertz’s due diligence review of Dollar Thrifty’s publicly available information to date, and is subject to change. For a further discussion of the risks relating to Hertz’s limited due diligence review, see “Risk Factors—Risk Factors Relating to the Offer and Second-Step Merger.”
Based on certain assumptions regarding the number of Dollar Thrifty shares to be exchanged and the number of Hertz shares that will be outstanding, Hertz estimates that, if all shares of Dollar Thrifty common stock are exchanged pursuant to the offer and second-step merger, former Dollar Thrifty stockholders would own, in the aggregate, approximately 5.6% of the outstanding shares of Hertz common stock. For a detailed discussion of the assumptions on which this estimate is based, see “The Exchange Offer—Ownership of Hertz After the Offer.”
Comparative Market Price and Dividend Information (See page 16)
Hertz common stock is listed on the NYSE under the symbol “HTZ.” Dollar Thrifty common stock is listed on the NYSE under the symbol “DTG.” The following table sets forth the closing prices of Hertz and Dollar Thrifty as reported on May 5, 2011 and May 6, 2011, the last two trading days prior to the public announcement of our offer. The table also shows the value of the cash and Hertz common stock you will receive in the offer in exchange for each share of Dollar Thrifty common stock you validly tender and do not properly withdraw before the expiration date at two different market prices of Hertz common stock (without giving effect to any required withholding taxes). This value was calculated by (i) multiplying the closing price for one share of Hertz common stock by the exchange ratio of 0.8546 and (ii) adding the cash consideration per share of $57.60.
|
Hertz Common Stock Closing Price
|
Dollar Thrifty Common Stock Closing Price
|
Value of Cash and Stock Consideration per Share of Dollar Thrifty Common Stock
|
||||||||||
|
May 5, 2011
|
$ | 16.75 | $ | 69.85 | $ | 71.91 | ||||||
|
May 6, 2011
|
$ | 16.85 | $ | 69.69 | $ | 72.00 | ||||||
The value of the Hertz common stock that forms a part of the offer consideration will change as the market price of Hertz common stock fluctuates during the pendency of the offer and thereafter, and therefore will likely be different from the prices set forth above at the time you receive your shares of Hertz common stock. See “Risk Factors.” You are encouraged to obtain current market quotations for shares of Dollar Thrifty and Hertz common stock prior to making any decision with respect to the offer.
Certain Relationships with Dollar Thrifty and Interests of Hertz and Purchaser in the Offer (See page 63)
As of the date of this prospectus/offer to exchange, The Hertz Corporation, a wholly owned subsidiary of Hertz, beneficially owned 472,699 shares of Dollar Thrifty common stock, representing approximately 1.6% of the Dollar Thrifty common stock outstanding as of April 29, 2011. These shares were acquired in ordinary brokerage transactions as set forth on Schedule III to this prospectus/offer to exchange.
Except as set forth in this prospectus/offer to exchange, neither we nor, after due inquiry and to the best of our knowledge and belief, any of our directors, executive officers or other affiliates, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of Dollar Thrifty. Hertz does not believe that the offer and second-step merger will be deemed to be a change in control of Hertz impacting grants under any of its stock incentive plans or a change in control under its supplemental retirement plans or any change in control severance agreement between Hertz and any of its employees.
Appraisal/Dissenters’ Rights (See page 54)
You do not have appraisal rights as a result of the offer. However, if the second-step merger is consummated, stockholders of Dollar Thrifty who do not tender their shares in the offer, continue to hold shares at the time of the consummation of the second-step merger, neither vote in favor of the second-step merger nor consent thereto in writing and otherwise comply with the applicable statutory procedures under Section 262 of the DGCL will be entitled to receive a judicial determination of the fair value of their Dissenting Shares. Since appraisal rights are not available in connection with the offer, no demand for appraisal under Section 262 of the DGCL may be made at this time. Any such judicial determination of the fair value of the Dissenting Shares could be based upon factors other than or in addition to the consideration paid in the offer and the market value of the shares. Holders of Dollar Thrifty common stock should recognize that the value so determined could be higher or lower than, or the same as, the consideration per share paid pursuant to the offer or the consideration paid in the second-step merger. Moreover, we may argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Dissenting Shares is less than the consideration paid in the offer.
Because of the complexity of Delaware law relating to appraisal rights, we encourage you to seek the advice of your own legal counsel. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights.
Material Federal Income Tax Consequences (See page 51)
The exchange of Dollar Thrifty common stock pursuant to the offer or second-step merger will be a taxable transaction for U.S. Federal income tax purposes. Accordingly, a U.S. Holder (as defined in “The Exchange Offer—Material Federal Income Tax Consequences”) of Dollar Thrifty common stock who receives Hertz common stock and cash in exchange for such U.S. Holder’s shares of Dollar Thrifty common stock generally will recognize taxable gain or loss in an amount equal to the difference, if any, between the fair market value of the Hertz common stock and cash received and such U.S. Holder’s adjusted tax basis in the shares of Dollar Thrifty common stock exchanged therefor.
THIS PROSPECTUS/OFFER TO EXCHANGE CONTAINS A GENERAL DESCRIPTION OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND SECOND-STEP MERGER. THIS DESCRIPTION DOES NOT ADDRESS ANY NON-U.S. TAX CONSEQUENCES, NOR DOES IT PERTAIN TO STATE, LOCAL OR OTHER TAX CONSEQUENCES. CONSEQUENTLY, HERTZ AND PURCHASER URGE YOU TO CONTACT YOUR OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU OF THE OFFER.
Accounting Treatment (See page 65)
Hertz will account for the acquisition of shares of Dollar Thrifty common stock under the acquisition method of accounting for business combinations. In determining the acquirer for accounting purposes, Hertz considered the factors required under FASB Accounting Standards Codification (ASC), Business Combinations, which is referred to as ASC 805, and determined that Hertz will be considered the acquirer for accounting purposes.
Regulatory Approvals; Certain Other Legal Matters (See page 60)
Antitrust Clearance
The offer is subject to review by the Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (“DOJ,” together with the FTC, the “antitrust agencies”). Under the HSR Act, the offer may not be completed until certain information has been provided to the antitrust agencies and the applicable HSR Act waiting period has expired or been terminated.
Pursuant to the requirements of the HSR Act, Hertz expects to file a Notification and Report Form with respect to the offer with the antitrust agencies and to request early termination of the HSR Act waiting period. There can be no assurance, however, that the waiting period will be terminated early. The FTC or DOJ may extend the initial waiting period by issuing a Request for Additional Information and Documentary Material (a “Second Request”). In such an event, the statutory waiting period would extend until 30 days after Hertz has substantially complied with the Second Request, unless it is earlier terminated by the applicable reviewing antitrust agency.
The antitrust agencies frequently scrutinize the legality under the antitrust laws of transactions such as Hertz’s acquisition of shares pursuant to the offer. At any time before or after the consummation of any such transactions, one of the antitrust agencies could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of shares pursuant to the offer or seeking divestiture of the shares so acquired or divestiture of certain of Hertz’s or Dollar Thrifty’s assets. States and private parties may also bring legal actions under the antitrust laws. There can be no assurance that a challenge to the offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See “The Exchange Offer—Conditions of the Offer” for certain conditions to the offer, including conditions with respect to litigation and certain governmental actions.
The offer is also subject to review pursuant to the Competition Act (Canada). Under the Competition Act (Canada), the offer may not be completed until certain information has been provided to the Canadian Competition Commissioner, and a required waiting period has expired or been terminated, provided there is no order in effect prohibiting completion at the relevant time. In connection with the 2010 Merger Agreement, Hertz provided such information to the Canadian Competition Commissioner and the required waiting period under the Competition Act (Canada) expired on June 21, 2010. On July 27, 2010, the Canadian Competition Commissioner issued a no-action letter stating she did not intend to challenge the proposed transaction. Under the Competition Act (Canada), the transaction may be completed within one year of the date that Hertz provided the required information to the Canadian Competition Commissioner in connection with the 2010 Merger Agreement, or such longer period as the Canadian Competition Commissioner may specify. This one-year period expires on May 21, 2011. As the one-year period following Hertz’s submission of the required information to the Canadian Competition Commissioner in connection with the 2010 Merger Agreement will expire on May 21, 2011, and in order to ensure compliance with the Competition Act (Canada), Hertz will seek an extension of the one-year period for a further eight-month period. If necessary, Purchaser will submit another notification and request for early termination of the mandatory waiting period concerning the offer to the Canadian Competition Commissioner.
In connection with an unsolicited transaction, the waiting period is 30 calendar days after the day on which Purchaser submits the prescribed information, provided that, before the expiry of this period, the Canadian Competition Commissioner has not issued a request for additional information (“Supplementary Information Request”). In the event that the Canadian Competition Commissioner issues a Supplementary Information Request, the transaction cannot be completed until 30 calendar days after Purchaser complies with such Supplementary Information Request, provided that there is no order in effect prohibiting completion at the relevant time. A transaction may be completed before the end of the applicable waiting period if the Canadian Competition Commissioner notifies the parties that she does not, at such time, intend to challenge the transaction.
At any time before a “merger” (as such term is defined under the Competition Act (Canada)) is completed, even where the applicable waiting period has expired or been terminated, the Canadian Competition Commissioner may apply to the Competition Tribunal for an interim order forbidding any person named in the application from doing any act or thing where it appears to the Competition Tribunal that such act or thing may constitute or be directed toward the completion or implementation of a proposed merger. The Competition Tribunal may issue an interim order where the Canadian Competition Commissioner requires more time to complete her inquiry and the Tribunal finds that, in the absence of an interim order, a party to the proposed merger or another person is likely to take an action that would substantially impair the ability of the Competition Tribunal to remedy the effect of the proposed merger on competition because that action would be difficult to reverse.
Other Regulatory Approvals
The offer and second-step merger may also be subject to review by other antitrust authorities in jurisdictions outside the U.S. We are not currently aware of any non-U.S. approvals, other than approvals from Canadian regulatory authorities. The offer and second-step merger may also be subject to approval by the Vermont Department of Banking, Insurance, Securities & Health Care Administration.
Hertz will submit the necessary applications to cause the shares of its common stock to be issued in the offer and second-step merger to be approved for listing on the NYSE. Approval of this listing is a condition to the offer.
Conditions of the Offer (See page 57)
The offer is conditioned upon, among other things, the following:
|
|
●
|
Minimum Tender Condition—Dollar Thrifty stockholders shall have validly tendered and not properly withdrawn prior to the expiration of the offer a number of shares of Dollar Thrifty common stock which, together with Dollar Thrifty shares then owned by Hertz and its subsidiaries (including Purchaser), represents at least a majority of the then outstanding shares of Dollar Thrifty common stock on a fully diluted basis.
|
|
|
●
|
Section 203 Condition—Dollar Thrifty’s board of directors shall have approved the offer and second-step merger under Section 203 of the DGCL or Hertz shall be satisfied, in its sole discretion, that Section 203 of the DGCL is inapplicable to the offer and second-step merger.
|
|
|
●
|
Competition Condition—The waiting periods applicable to the offer and second-step merger under the HSR Act and the no-close period (including any extensions thereof) applicable to the offer and second-step merger under the Competition Act (Canada) shall have, in each case, expired or been waived or terminated.
|
|
|
●
|
Registration Statement Condition—The registration statement of which this prospectus/offer to exchange is a part shall have been declared effective by the SEC under the Securities Act, no stop order suspending the effectiveness of the registration statement shall have been issued by the SEC and no proceeding for that purpose shall have been initiated or threatened by the SEC.
|
|
|
●
|
NYSE Listing Condition—The shares of Hertz common stock to be issued pursuant to the offer and second-step merger shall have been approved for listing on the NYSE, subject to official notice of issuance.
|
|
|
●
|
Injunction Condition—No temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction or other statute, law, rule, legal restraint or prohibition shall be in effect that restrains, enjoins, prohibits or otherwise makes illegal the consummation of the offer and the other transactions contemplated by this prospectus/offer to exchange.
|
The conditions to the offer, including those set forth above, are for the sole benefit of Purchaser and Hertz and may be asserted by Purchaser regardless of the circumstances giving rise to any such condition or, other than the “Competition Condition,” “Registration Statement Condition,” “NYSE Listing Condition” and the “Injunction Condition,” may be waived by Purchaser in whole or in part at any time and from time to time.
See “The Exchange Offer—Conditions of the Offer” for additional conditions to the offer.
Comparison of Stockholders’ Rights (See page 71)
Upon the terms and subject to the conditions of the offer, if the offer is consummated, you will receive Hertz common stock as part of the offer consideration if you tender your shares of Dollar Thrifty common stock in the offer. For a description of the differences between the rights of a stockholder of Dollar Thrifty and the rights of a stockholder of Hertz, see “Comparison of Stockholders’ Rights.”
Expiration Date of the Offer (See page 43)
The offer is scheduled to expire at 12:00 midnight, New York City time, on July 8, 2011, which is the initial expiration date, unless further extended by Hertz or Purchaser.
Extension, Termination and Amendment (See page 43)
Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time to the fullest extent permitted by law:
|
|
●
|
to extend, for any reason, the period of time during which the offer is open;
|
|
|
●
|
to delay acceptance for exchange of, or exchange of, any shares of Dollar Thrifty common stock in order to comply in whole or in part with applicable law;
|
|
|
●
|
to amend or terminate the offer without accepting for exchange, or exchanging, any shares of Dollar Thrifty common stock, if any of the conditions referred to in the section of this prospectus/offer to exchange entitled “The Exchange Offer—Conditions of the Offer” have not been satisfied; and
|
|
|
●
|
to waive any conditions to the offer or to otherwise amend the offer in any respect;
|
in each case, by giving oral or written notice of such delay, termination, waiver or amendment to the exchange agent and by making public announcement thereof.
In addition, even if Purchaser has accepted for exchange, but has not exchanged, shares in the offer, it may terminate the offer and not exchange shares of Dollar Thrifty common stock that were previously tendered if completion of the offer is illegal or if a governmental authority has commenced or threatened legal action related to the offer. See “The Exchange Offer—Conditions of the Offer.”
Procedure for Tendering (See page 46)
The procedure for tendering shares of Dollar Thrifty common stock varies depending on whether you possess physical certificates or a nominee holds your certificates for you, and on whether or not you hold your securities in book-entry form. In addition to the procedures outlined in this prospectus/offer to exchange, Hertz and Purchaser urge you to read the accompanying transmittal materials, including the accompanying letter of transmittal.
Withdrawal Rights (See page 49)
You can withdraw tendered shares at any time until the offer has expired, and, if we have not accepted your shares for exchange within 60 days after commencement of the offer, you can withdraw them at any time after such date until we accept shares for exchange. You may not, however, withdraw shares tendered during a subsequent offering period, if one is included.
Acceptance for Exchange, and Exchange, of Dollar Thrifty Shares; Delivery of Hertz Common Stock (See page 45)
Upon the terms and subject to the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will, promptly after the expiration date, accept for exchange, and will exchange for cash and shares of Hertz common stock and, as applicable, cash in lieu of fractional shares, all shares of Dollar Thrifty common stock validly tendered and not properly withdrawn. If Purchaser elects to provide a subsequent offering period following the expiration of the offer, shares tendered during such subsequent offering period will be accepted for exchange immediately upon tender and will be promptly exchanged for the offer consideration.
Risk Factors (See page 17)
The offer and second-step merger are, and if the offer and second-step merger are consummated, the combined company will be, subject to a number of risks which you should carefully consider prior to participating in the offer.
Set forth below is certain selected historical consolidated financial information relating to Hertz. The selected financial information of Hertz for each of the years ended December 31, 2010, 2009, 2008, 2007 and 2006 are derived from Hertz’s audited financial statements filed as part of Hertz’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on February 25, 2011, referred to as the “Hertz 10-K,” which is incorporated by reference into this prospectus/offer to exchange. The selected financial information of Hertz as of and for the three months ended March 31, 2011 and March 31, 2010 are derived from Hertz’s unaudited consolidated financial statements filed as part of Hertz’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 filed with the SEC on May 6, 2011, referred to as the “Hertz 10-Q,” which is incorporated by reference into this prospectus/offer to exchange. The operating results for the three-month period ended March 31, 2011 are not necessarily indicative of the results of operations for the remainder of the fiscal year or any future period. More comprehensive financial information, including management’s discussion and analysis of Hertz’s financial condition and results of operations, is contained in the Hertz 10-K, the Hertz 10-Q and other reports filed by Hertz with the SEC. The following selected historical consolidated financial information is qualified in its entirety by reference to such other documents and all of the financial information and notes contained in those documents. See “Where You Can Find More Information.”
|
Three Months
Ended March 31,
(unaudited)
|
Years ended December 31,
|
|||||||||||||||||||||||||||
|
2011
|
2010
|
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
Statement of Operations Information
|
||||||||||||||||||||||||||||
|
(in millions of dollars except per share data)
|
||||||||||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||||||||||
|
Car rental
|
$ | 1,478.9 | $ | 1,396.6 | $ | 6,355.2 | $ | 5,872.9 | $ | 6,730.4 | $ | 6,800.7 | $ | 6,273.6 | ||||||||||||||
|
Equipment rental
|
268.1 | 237.0 | 1,069.8 | 1,110.2 | 1,657.3 | 1,755.3 | 1,672.1 | |||||||||||||||||||||
|
Other(a)
|
33.0 | 27.3 | 137.5 | 118.4 | 137.4 | 129.6 | 112.7 | |||||||||||||||||||||
|
Total revenues
|
1,780.0 | 1,660.9 | 7,562.5 | 7,101.5 | 8,525.1 | 8,685.6 | 8,058.4 | |||||||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||||||
|
Direct operating
|
1,073.7 | 1,013.0 | 4,282.4 | 4,084.2 | 4,930.0 | 4,644.1 | 4,476.0 | |||||||||||||||||||||
|
Depreciation of revenue earning equipment and lease charges(b)
|
436.1 | 459.2 | 1,868.1 | 1,931.4 | 2,194.2 | 2,003.4 | 1,757.2 | |||||||||||||||||||||
|
Selling, general and administrative
|
182.2 | 167.7 | 664.5 | 641.1 | 769.6 | 775.9 | 723.9 | |||||||||||||||||||||
|
Interest expense
|
196.9 | 181.1 | 773.4 | 680.3 | 870.0 | 916.7 | 943.3 | |||||||||||||||||||||
|
Interest income
|
(1.9 | ) | (2.3 | ) | (12.3 | ) | (16.0 | ) | (24.8 | ) | (41.3 | ) | (42.6 | ) | ||||||||||||||
|
Other (income) expense, net(c)
|
51.9 | — | — | (48.5 | ) | — | — | — | ||||||||||||||||||||
|
Impairment charges(d)
|
— | — | — | — | 1,168.9 | — | — | |||||||||||||||||||||
|
Total expenses
|
1,938.9 | 1,818.7 | 7,576.1 | 7,272.5 | 9,907.9 | 8,298.8 | 7,857.8 | |||||||||||||||||||||
|
Income (loss) before income taxes
|
(158.9 | ) | (157.8 | ) | (13.6 | ) | (171.0 | ) | (1,382.8 | ) | 386.8 | 200.6 | ||||||||||||||||
|
(Provision) benefit for taxes on income(e)
|
30.0 | 11.0 | (17.0 | ) | 59.7 | 196.9 | (102.6 | ) | (68.0 | ) | ||||||||||||||||||
|
Net income (loss)
|
(128.9 | ) | (146.8 | ) | (30.6 | ) | (111.3 | ) | (1,185.9 | ) | 284.2 | 132.6 | ||||||||||||||||
|
Noncontrolling interest
|
(3.7 | ) | (3.6 | ) | (17.4 | ) | (14.7 | ) | (20.8 | ) | (19.7 | ) | (16.7 | ) | ||||||||||||||
|
Net income (loss) attributable to Hertz Global Holdings, Inc. and Subsidiaries’ common stockholders
|
$ | (132.6 | ) | $ | (150.4 | ) | $ | (48.0 | ) | $ | (126.0 | ) | $ | (1,206.7 | ) | $ | 264.5 | $ | 115.9 | |||||||||
|
Weighted average shares outstanding (in millions)
|
||||||||||||||||||||||||||||
|
Basic
|
414.1 | 410.7 | 411.9 | 371.5 | 322.7 | 321.2 | 242.5 | |||||||||||||||||||||
|
Diluted
|
414.1 | 410.7 | 411.9 | 371.5 | 322.7 | 325.5 | 243.4 | |||||||||||||||||||||
|
Earnings (loss) per share
|
||||||||||||||||||||||||||||
|
Basic
|
$ | (0.32 | ) | $ | (0.37 | ) | $ | (0.12 | ) | $ | (0.34 | ) | $ | (3.74 | ) | $ | 0.82 | $ | 0.48 | |||||||||
|
Diluted
|
$ | (0.32 | ) | $ | (0.37 | ) | $ | (0.12 | ) | $ | (0.34 | ) | $ | (3.74 | ) | $ | 0.81 | $ | 0.48 |
|
March 31,
(unaudited)
|
December 31,
|
|||||||||||||||||||||||||||
|
2011
|
2010
|
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
Balance Sheet Data
(in millions of dollars)
|
||||||||||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 1,365.8 | $ | 800.7 | $ | 2,374.2 | $ | 985.6 | $ | 594.3 | $ | 730.2 | $ | 674.5 | ||||||||||||||
|
Total assets(f)
|
16,827.6 | 16,278.4 | 17,332.2 | 16,002.4 | 16,451.4 | 19,255.7 | 18,677.4 | |||||||||||||||||||||
|
Total debt
|
10,750.0 | 10,387.9 | 11,306.4 | 10,364.4 | 10,972.3 | 11,960.1 | 12,276.2 | |||||||||||||||||||||
|
Total equity
|
2,034.7 | 1,940.0 | 2,131.3 | 2,097.4 | 1,488.3 | 2,934.4 | 2,549.4 | |||||||||||||||||||||
|
(a)
|
Includes fees and certain cost reimbursements from Hertz’s licensees and revenues from Hertz’s car leasing operations and third-party claim management services.
|
|
(b)
|
For the three months ended March 31, 2011 and 2010 and the years ended December 31, 2010, 2009, 2008, 2007 and 2006, depreciation of revenue earning equipment decreased by $1.6 million and increased by $9.5 million, $22.7 million, $19.3 million, $32.7 million and $0.6 million and reduced by $13.1 million, respectively, resulting from the net effects of changing depreciation rates to reflect changes in the estimated residual value of revenue earning equipment. For the three months ended March 31, 2011 and 2010 and the years ended December 31, 2010, 2009, 2008, 2007 and 2006, depreciation of revenue earning equipment and lease charges includes a net gain of $6.2 million, and net losses of $14.8 million, $42.9 million, $72.0 million, $74.3 million and $13.3 million and a net gain of $40.1 million, respectively, from the disposal of revenue earning equipment.
|
|
(c)
|
For the three months ended March 31, 2011, primarily reflects premiums paid to redeem our 10.5% Senior Subordinated Notes and a portion of our 8.875% Senior Notes. For the year ended December 31, 2009, reflects a gain of $48.5 million, net of transaction costs, recorded in connection with the buyback of portions of certain of Hertz’s Senior Notes and Senior Subordinated Notes.
|
|
(d)
|
For the year ended December 31, 2008, Hertz recorded non-cash impairment charges related to its goodwill, other intangible assets and property and equipment.
|
|
(e)
|
For the years ended December 31, 2010, 2009 and 2008, tax valuation allowances increased by $27.5 million, $39.7 million and $58.5 million, respectively (excluding the effects of foreign currency translation), relating to the realization of deferred tax assets attributable to net operating losses, credits and other temporary differences in various jurisdictions. Additionally, certain tax reserves were recorded and certain tax reserves were released due to settlement for various uncertain tax positions in Federal, state and foreign jurisdictions. For the year ended December 31, 2007, Hertz reversed a valuation allowance of $9.1 million relating to the realization of deferred tax assets attributable to net operating losses and other temporary differences in certain European countries. Additionally, certain tax reserves were recorded for various uncertain tax positions in Federal, state and foreign jurisdictions. For the year ended December 31, 2006, Hertz established valuation allowances of $9.8 million relating to the realization of deferred tax assets attributable to net operating losses and other temporary differences in certain European countries. Additionally, certain tax reserves were recorded for certain Federal and state uncertain tax positions.
|
|
(f)
|
Substantially all of Hertz’s revenue earning equipment, as well as certain related assets, are owned by special purpose entities, or are subject to liens in favor of Hertz’s lenders under Hertz’s various credit facilities, other secured financings and asset-backed securities programs. None of such assets are available to satisfy the claims of Hertz’s general creditors. For a description of those facilities, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in the Hertz 10-K, which is incorporated into this prospectus/offer to exchange by reference.
|
Set forth below is certain selected historical consolidated financial information relating to Dollar Thrifty. The selected financial information of Dollar Thrifty for each of the years ended December 31, 2010, 2009, 2008, 2007 and 2006 are derived from Dollar Thrifty’s audited financial statements filed as part of Dollar Thrifty’s Annual Report on Form 10-K for the year ended December 31, 2010 filed by Dollar Thrifty with the SEC on February 28, 2011, referred to as the “Dollar Thrifty 10-K,” which is incorporated by reference into this prospectus/offer to exchange. The selected financial information of Dollar Thrifty as of and for the three months ended March 31, 2011 and March 31, 2010 are derived from Dollar Thrifty’s unaudited consolidated financial statements filed as part of Dollar Thrifty’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 filed with the SEC on May 5, 2011, referred to as the “Dollar Thrifty 10-Q,” which is incorporated by reference into this prospectus/offer to exchange. The operating results for the three-month period ended March 31, 2011 are not necessarily indicative of the results of operations for the remainder of the fiscal year or any future period. More comprehensive financial information, including management’s discussion and analysis of Dollar Thrifty’s financial condition and results of operations, is contained in the Dollar Thrifty 10-K, the Dollar Thrifty 10-Q and other reports filed with the SEC. The following selected historical consolidated financial information is qualified in its entirety by reference to such other documents and all of the financial information and notes contained in those documents. See “Where You Can Find More Information.”
|
Three Months
Ended March 31,
(unaudited)
|
Year Ended December 31,
|
|||||||||||||||||||||||||||
|
2011
|
2010
|
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
Statements of Operations Information:
|
||||||||||||||||||||||||||||
|
(in thousands of dollars except per share data)
|
||||||||||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||||||||||
|
Vehicle rentals
|
$ | 332,272 | $ | 332,484 | $ | 1,473,023 | $ | 1,472,918 | $ | 1,616,153 | $ | 1,676,349 | $ | 1,538,673 | ||||||||||||||
|
Other
|
16,075 | 15,846 | 64,137 | 73,331 | 81,840 | 84,442 | 122,004 | |||||||||||||||||||||
|
Total revenues
|
348,347 | 348,330 | 1,537,160 | 1,546,249 | 1,697,993 | 1,760,791 | 1,660,677 | |||||||||||||||||||||
|
Costs and expenses:
|
||||||||||||||||||||||||||||
|
Direct vehicle and operating
|
178,305 | 179,858 | 745,535 | 768,456 | 888,294 | 887,178 | 827,440 | |||||||||||||||||||||
|
Vehicle depreciation and lease charges, net
|
74,174 | 59,034 | 299,200 | 426,092 | 539,406 | 477,853 | 380,005 | |||||||||||||||||||||
|
Selling, general and administrative
|
48,947 | 48,350 | 209,341 | 200,389 | 213,734 | 230,515 | 259,474 | |||||||||||||||||||||
|
Interest expense, net
|
20,977 | 21,408 | 89,303 | 96,560 | 110,424 | 109,728 | 95,974 | |||||||||||||||||||||
|
Goodwill and long-lived asset impairment
|
— | — | 1,057 | 2,592 | 366,822 | 3,719 | — | |||||||||||||||||||||
|
Total costs and expenses
|
322,403 | 308,650 | 1,344,436 | 1,494,089 | 2,118,680 | 1,708,993 | 1,562,893 | |||||||||||||||||||||
|
(Increase) decrease in fair value of derivatives
|
(3,474 | ) | (7,370 | ) | (28,694 | ) | (28,848 | ) | 36,114 | 38,990 | 9,363 | |||||||||||||||||
|
Income (loss) before income taxes
|
29,418 | 47,050 | 221,418 | 81,008 | (456,801 | ) | 12,808 | 88,421 | ||||||||||||||||||||
|
Income tax expense (benefit)
|
12,895 | 19,758 | 90,202 | 35,986 | (110,083 | ) | 11,593 | 36,729 | ||||||||||||||||||||
|
Net income (loss)
|
$ | 16,523 | $ | 27,292 | $ | 131,216 | $ | 45,022 | $ | (346,718 | ) | $ | 1,215 | $ | 51,692 | |||||||||||||
|
Basic Earnings (Loss) Per Share
|
$ | 0.57 | $ | 0.96 | $ | 4.58 | $ | 1.98 | $ | (16.22 | ) | $ | 0.05 | $ | 2.14 | |||||||||||||
|
Diluted Earnings (Loss) Per Share
|
$ | 0.53 | $ | 0.91 | $ | 4.34 | $ | 1.88 | $ | (16.22 | ) | $ | 0.05 | $ | 2.04 | |||||||||||||
|
Weighted average shares outstanding (in millions)
|
||||||||||||||||||||||||||||
|
Basic
|
28.8 | 28.5 | 28.6 | 22.7 | 21.4 | 22.6 | 24.2 | |||||||||||||||||||||
|
Diluted
|
31.1 | 30.0 | 30.2 | 24.0 | 21.4 | 23.6 | 25.3 | |||||||||||||||||||||
|
March 31,
(unaudited)
|
December 31,
|
|||||||||||||||||||||||||||
|
2011
|
2010
|
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
Balance Sheet Data
(in thousands)
|
||||||||||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 518,548 | $ | 352,074 | $ | 463,153 | $ | 400,404 | $ | 229,636 | $ | 101,025 | $ | 191,891 | ||||||||||||||
|
Cash and cash equivalents - required minimum balance
|
$ | — | $ | 100,000 | $ | 100,000 | $ | 100,000 | $ | — | $ | — | $ | — | ||||||||||||||
|
Restricted cash and investments
|
$ | 159,945 | $ | 146,507 | $ | 277,407 | $ | 622,540 | $ | 596,588 | $ | 132,945 | $ | 389,794 | ||||||||||||||
|
Revenue-earning vehicles, net
|
$ | 1,682,099 | $ | 1,565,479 | $ | 1,341,822 | $ | 1,228,637 | $ | 1,946,079 | $ | 2,808,354 | $ | 2,623,719 | ||||||||||||||
|
Total assets
|
$ | 2,657,986 | $ | 2,470,879 | $ | 2,499,528 | $ | 2,645,937 | $ | 3,238,181 | $ | 3,891,452 | $ | 4,011,498 | ||||||||||||||
|
Debt and other obligations
|
$ | 1,551,315 | $ | 1,522,833 | $ | 1,397,243 | $ | 1,727,810 | $ | 2,488,245 | $ | 2,656,562 | $ | 2,744,284 | ||||||||||||||
|
Stockholders’ equity
|
$ | 559,493 | $ | 423,110 | $ | 538,607 | $ | 393,914 | $ | 208,420 | $ | 578,865 | $ | 647,700 | ||||||||||||||
For illustrative purposes only, presented below is summary selected unaudited pro forma combined financial information that is intended to provide you with a better picture of what the financial results might have looked like had Hertz and Dollar Thrifty already been combined. The unaudited pro forma combined balance sheet information combines information from the historical consolidated balance sheets of Hertz and of Dollar Thrifty as of March 31, 2011, giving effect to the offer and second-step merger as if they had occurred on March 31, 2011. The unaudited pro forma combined statements of operations information combines information from the historical consolidated statements of operations of Hertz and of Dollar Thrifty for the year ended December 31, 2010 and the three months ended March 31, 2011, giving effect to the offer and second-step merger as if they had occurred on January 1, 2010. The summary selected unaudited pro forma combined financial information has been prepared using the acquisition method of accounting under GAAP, which is subject to change and interpretation. Hertz has been treated as the acquirer in the offer and second-step merger for accounting purposes.
The summary selected unaudited pro forma combined financial information has been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the offer and second-step merger been completed as of the dates indicated. In addition, the summary selected unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company. Dollar Thrifty has not participated in the preparation of the summary selected unaudited pro forma combined financial information, unaudited pro forma condensed combined financial information or this prospectus/offer to exchange and has not reviewed or verified the information, assumptions or estimates relating to Dollar Thrifty in the unaudited pro forma condensed combined financial information. The following information has been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included in this prospectus/offer to exchange. See “Unaudited Pro Forma Condensed Combined Financial Information of Hertz and Dollar Thrifty.”
Unaudited Pro Forma Combined Statements of Operations Information
(in thousands of dollars):
|
Three Months Ended
March 31,
2011
|
Year Ended
December 31,
2010
|
|||||||
|
Revenues:
|
||||||||
|
Car rental
|
$ | 1,811,210 | $ | 7,828,228 | ||||
|
Equipment rental
|
268,086 | 1,069,820 | ||||||
|
Other
|
49,054 | 201,646 | ||||||
|
Total revenues
|
2,128,350 | 9,099,694 | ||||||
|
Expenses:
|
||||||||
|
Direct operating
|
1,251,970 | 5,027,886 | ||||||
|
Depreciation of revenue earning equipment and lease charges
|
510,263 | 2,167,347 | ||||||
|
Selling, general and administrative
|
224,261 | 811,780 | ||||||
|
Interest expense
|
219,034 | 871,034 | ||||||
|
Interest and other (income) expense, net
|
49,556 | (13,894 | ) | |||||
|
Impairment charges
|
— | 1,057 | ||||||
|
Total expenses
|
2,255,084 | 8,865,210 | ||||||
|
Income (loss) before income taxes
|
(126,734 | ) | 234,484 | |||||
|
(Provision) benefit for taxes on income
|
15,981 | (117,667 | ) | |||||
|
Net income (loss)
|
(110,753 | ) | 116,817 | |||||
|
Less: Net income attributable to noncontrolling interest
|
(3,673 | ) | (17,383 | ) | ||||
|
Net income (loss) attributable to Hertz/Dollar Thrifty common stockholders
|
$ | (114,426 | ) | $ | 99,434 | |||
.
Unaudited Pro Forma Combined Balance Sheet Information
(in thousands of dollars):
|
March 31, 2011
|
||||
|
Assets
|
||||
|
Cash and cash equivalents
|
$ | 29,670 | ||
|
Restricted cash
|
350,831 | |||
|
Receivables, less allowance for doubtful accounts
|
1,410,848 | |||
|
Inventories, at lower of cost or market
|
97,472 | |||
|
Prepaid expenses and other assets
|
493,665 | |||
|
Revenue earning equipment, net
|
||||
|
Cars
|
9,396,250 | |||
|
Other equipment
|
1,687,109 | |||
|
Total revenue earning equipment
|
11,083,359 | |||
|
Property and equipment, net
|
1,297,461 | |||
|
Other intangible assets, net
|
3,085,570 | |||
|
Goodwill
|
1,639,008 | |||
|
Total Assets
|
$ | 19,487,884 | ||
|
Liabilities and Equity
|
||||
|
Accounts payable
|
$ | 1,237,533 | ||
|
Accrued liabilities
|
1,120,114 | |||
|
Accrued taxes
|
101,629 | |||
|
Debt
|
12,138,959 | |||
|
Public liability and property damage
|
392,816 | |||
|
Deferred taxes on income
|
1,931,815 | |||
|
Total Liabilities
|
16,922,866 | |||
|
Common Stock
|
4,396 | |||
|
Preferred Stock
|
— | |||
|
Additional paid-in capital
|
3,748,036 | |||
|
Accumulated deficit
|
(1,276,437 | ) | ||
|
Accumulated other comprehensive income
|
68,873 | |||
|
Total Hertz/Dollar Thrifty equity
|
2,544,868 | |||
|
Noncontrolling interest
|
20,150 | |||
|
Total Equity
|
2,565,018 | |||
|
Total Liabilities and Equity
|
$ | 19,487,884 | ||
The historical per share earnings, dividends, and book value of Hertz and Dollar Thrifty shown in the tables below are derived from their respective audited consolidated financial statements for the year ended December 31, 2010 and their respective unaudited consolidated financial statements for the three months ended March 31, 2011. The pro forma comparative basic and diluted earnings per share data give effect to the offer and second-step merger using the acquisition method of accounting as if the offer and second-step merger had been completed on January 1, 2010. The pro forma book value per share information was computed as if the offer and second-step merger had been completed on March 31, 2011. You should read this information in conjunction with the historical financial information of Hertz and of Dollar Thrifty included elsewhere or incorporated in this prospectus/offer to exchange, including Hertz’s and Dollar Thrifty’s financial statements and related notes. The per share pro forma information assumes that all shares of Dollar Thrifty common stock are converted into shares of Hertz common stock at the exchange ratio of 0.8546. The equivalent pro forma per share information was derived by multiplying the combined company pro forma per share information by the exchange ratio of 0.8546.
The pro forma data shown in the tables below is unaudited and for illustrative purposes only. You should not rely on this data as being indicative of the historical results that would have been achieved had Hertz and Dollar Thrifty always been combined or the future results that the combined company will achieve after the consummation of the offer and second-step merger. This pro forma information is subject to risks and uncertainties, including those discussed in the section entitled “Risk Factors.”
|
Three Months Ended March 31, 2011
|
||||||||||||||||
|
Hertz
|
Dollar Thrifty
|
|||||||||||||||
|
Historical
|
Combined Company Pro Forma
|
Historical
|
Equivalent Pro Forma
|
|||||||||||||
|
Basic earnings (loss) per share
|
$ | (0.32 | ) | $ | (0.26 | ) | $ | 0.57 | $ | (0.22 | ) | |||||
|
Diluted earnings (loss) per share
|
(0.32 | ) | (0.26 | ) | 0.53 | (0.22 | ) | |||||||||
|
Cash dividends declared per share
|
— | — | — | — | ||||||||||||
|
Book value per share at period end
|
$ | 4.86 | $ | 5.79 | $ | 19.34 | $ | 4.95 | ||||||||
|
Year Ended December 31, 2010
|
||||||||||||||||
|
Hertz
|
Dollar Thrifty
|
|||||||||||||||
|
Historical
|
Combined Company Pro Forma
|
Historical
|
Equivalent Pro Forma
|
|||||||||||||
|
Basic earnings (loss) per share
|
$ | (0.12 | ) | $ | 0.23 | $ | 4.58 | $ | 0.20 | |||||||
|
Diluted earnings (loss) per share
|
(0.12 | ) | 0.22 | 4.34 | 0.19 | |||||||||||
|
Cash dividends declared per share
|
— | — | — | — | ||||||||||||
|
Book value per share at period end
|
$ | 5.11 | n/a | $ | 18.73 | n/a | ||||||||||
Shares of Hertz common stock are listed on the NYSE under the symbol “HTZ” and shares of Dollar Thrifty common stock are listed on the NYSE under the symbol “DTG.”
The following table sets forth the high and low closing sales prices per share of Hertz and Dollar Thrifty common stock for the periods indicated, in each case as reported on the consolidated tape of the NYSE, as reported in publicly available sources.
|
Hertz Common Stock
Market Price
|
Dollar Thrifty Common
Stock Market Price
|
|||||||||||||||
|
High
|
Low
|
High
|
Low
|
|||||||||||||
|
2009
|
||||||||||||||||
|
First Quarter
|
$ | 6.06 | $ | 2.00 | $ | 1.60 | $ | 0.62 | ||||||||
|
Second Quarter
|
$ | 9.00 | $ | 4.22 | $ | 14.14 | $ | 1.29 | ||||||||
|
Third Quarter
|
$ | 11.70 | $ | 7.97 | $ | 25.84 | $ | 13.80 | ||||||||
|
Fourth Quarter
|
$ | 12.38 | $ | 8.89 | $ | 27.23 | $ | 18.01 | ||||||||
|
2010
|
||||||||||||||||
|
First Quarter
|
$ | 12.18 | $ | 9.12 | $ | 34.60 | $ | 23.84 | ||||||||
|
Second Quarter
|
$ | 14.75 | $ | 9.41 | $ | 51.55 | $ | 32.09 | ||||||||
|
Third Quarter
|
$ | 11.95 | $ | 8.51 | $ | 52.34 | $ | 41.06 | ||||||||
|
Fourth Quarter
|
$ | 14.55 | $ | 9.72 | $ | 50.00 | $ | 45.76 | ||||||||
|
2011
|
||||||||||||||||
|
First Quarter
|
$ | 16.52 | $ | 13.68 | $ | 66.73 | $ | 47.70 | ||||||||
|
Second Quarter (through May 6, 2011)
|
$ | 17.25 | $ | 15.91 | $ | 69.85 | $ | 66.60 | ||||||||
Neither Hertz nor Dollar Thrifty have paid any cash dividends on their respective common stock during the periods indicated above.
The following table sets forth the closing prices of Hertz and Dollar Thrifty as reported on May 5, 2011 and May 6, 2011, the last two trading days prior to the public announcement of our offer. The table also shows the value of the cash and Hertz common stock you will receive in the offer in exchange for each share of Dollar Thrifty common stock you validly tender and do not properly withdraw before the expiration date at two different market prices of Hertz common stock (without giving effect to any required withholding taxes). This value was calculated by (i) multiplying the closing price for one share of Hertz common stock by the exchange ratio of 0.8546 and (ii) adding the cash consideration per share of $57.60.
|
Hertz Common Stock Closing Price
|
Dollar Thrifty Common Stock Closing Price
|
Value of Cash and Stock Consideration per Share of Dollar Thrifty Common Stock
|
||||||||||
|
May 5, 2011
|
$ | 16.75 | $ | 69.85 | $ | 71.91 | ||||||
|
May 6, 2011
|
$ | 16.85 | $ | 69.69 | $ | 72.00 | ||||||
The value of the Hertz common stock that forms a part of the offer consideration will change as the market price of Hertz common stock fluctuates during the pendency of the offer and thereafter, and therefore will likely be different from the prices set forth above at the time you receive your shares of Hertz common stock. See “Risk Factors.” Stockholders are encouraged to obtain current market quotations for Hertz and Dollar Thrifty common stock prior to making any decision with respect to the offer.
See “The Exchange Offer—Effect of the Offer on the Market for Shares of Dollar Thrifty Common Stock; NYSE Listing; Registration Under the Exchange Act; Margin Regulations” for a discussion of the possibility that Dollar Thrifty’s shares will cease to be listed on the NYSE.
In addition to the other information included and incorporated by reference in this prospectus/offer to exchange (see “Where You Can Find More Information”), including the matters addressed in the section entitled “Forward-Looking Statements,” you should carefully consider the following risks before deciding whether to tender your shares of Dollar Thrifty common stock in the offer.
Risk Factors Relating to the Offer and Second-Step Merger
The exchange ratio for the stock portion of the offer consideration is fixed and will not be adjusted. Because the market price of shares of Hertz common stock may fluctuate, Dollar Thrifty stockholders cannot be sure of the market value of the shares of Hertz common stock that will be issued in connection with the offer.
Each share of Dollar Thrifty common stock that is validly tendered and not properly withdrawn prior to the expiration date will be exchanged for (i) $57.60 in cash, without interest and less any required withholding taxes, and (ii) 0.8546 shares of Hertz common stock upon consummation of the offer. The exchange ratio for the stock portion of the offer consideration is fixed and will not be adjusted in case of any increases or decreases in the price of Hertz common stock or Dollar Thrifty common stock. The market value of the shares of Hertz common stock that tendering Dollar Thrifty stockholders will receive in the offer will depend on the market value of shares of Hertz common stock at the time tendered shares are exchanged and could vary significantly from the market value of shares of Hertz common stock as of the date of this prospectus/offer to exchange.
Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Hertz’s businesses, operations and prospects, regulatory considerations, market reaction to the offer and related developments and as a result of the risks described in the section of this prospectus/offer to exchange entitled “Risk Factors.” Many of these factors are beyond the control of Hertz or Purchaser. If the price of Hertz common stock declines, Dollar Thrifty stockholders will receive less value for their shares upon exchange of tendered shares in the offer than the value calculated pursuant to the exchange ratio on the date the offer was announced. Because the offer may not be completed until certain conditions have been satisfied or waived (see “The Exchange Offer—Conditions of the Offer”), a significant period of time may pass between the commencement of the offer and the time that Hertz accepts shares of Dollar Thrifty common stock for exchange.
Therefore, at the time you tender your shares pursuant to the offer, you will not know the exact market value of the shares of Hertz common stock that will be issued if Hertz accepts such shares for exchange. See “Comparative Market Price and Dividend Information” for the historical high and low sales prices per share of Hertz and Dollar Thrifty common stock, as well as cash dividends per share of Hertz and Dollar Thrifty common stock, respectively.
Dollar Thrifty stockholders are urged to obtain current market quotations for Hertz and Dollar Thrifty common stock when they consider whether to tender their shares of Dollar Thrifty common stock pursuant to the offer.
The offer may adversely affect the liquidity and value of non-tendered shares of Dollar Thrifty common stock.
In the event that not all of the shares of Dollar Thrifty common stock are tendered in the offer and we accept for exchange those shares tendered in the offer, the number of stockholders and the number of shares of Dollar Thrifty common stock held by individual holders will be greatly reduced. As a result, Hertz’s acceptance of shares for exchange in the offer could adversely affect the liquidity and could also adversely affect the market value of the remaining shares of Dollar Thrifty common stock held by the public. If permitted by the rules of the NYSE, Hertz currently intends to cause Dollar Thrifty to delist the shares of Dollar Thrifty common stock from the NYSE following consummation of the offer. As a result of such delisting, shares of Dollar Thrifty common stock not tendered pursuant to the offer may become illiquid and may be of reduced value. See “The Exchange Offer—Plans for Dollar Thrifty.”
Combining the businesses of Hertz and Dollar Thrifty may be more difficult, costly or time-consuming than expected, which may adversely affect Hertz’s results and negatively affect the value of Hertz’s stock following the offer and second-step merger.
Hertz intends, to the extent possible, to integrate Dollar Thrifty’s operations with those of Hertz. The success of the offer and second-step merger will depend, in part, on Hertz’s ability to realize the anticipated benefits and cost savings from combining the businesses of Hertz and Dollar Thrifty. To realize these anticipated benefits and cost savings, Hertz must successfully combine the businesses of Hertz and Dollar Thrifty in an efficient and effective manner. In addition, Hertz must obtain amendments to certain of Dollar Thrifty’s debt agreements to permit Hertz to use Dollar Thrifty’s rental vehicles in order to maximize Hertz’s sharing of Dollar Thrifty’s fleet. Also, Hertz must obtain the consent of certain counterparties to Dollar Thrifty’s contracts that give the counterparty a right to terminate the contract or other rights in connection with the offer and second-step merger. If Hertz and Dollar Thrifty are not able to achieve these objectives within the anticipated timeframe, or at all, the anticipated benefits and cost savings of the transaction may not be realized fully, or at all, or may take longer to realize than expected, and the value of Hertz’s common stock may be affected adversely.
It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect Hertz’s ability to maintain relationships with customers, employees, suppliers and franchisees or to achieve the anticipated benefits of the transaction.
Specifically, issues that must be addressed in integrating the operations of Dollar Thrifty into Hertz’s operations in order to realize the anticipated benefits of the offer and second-step merger include, among other things:
|
|
●
|
integrating and optimizing the utilization of the rental vehicle fleets of Hertz and Dollar Thrifty;
|
|
|
●
|
integrating the marketing, promotion, reservation and information technology systems of Hertz and Dollar Thrifty;
|
|
|
●
|
maintenance of the combined company’s brand portfolio;
|
|
|
●
|
conforming standards, controls, procedures and policies, business cultures and compensation structures between the companies;
|
|
|
●
|
consolidating the automotive purchasing, maintenance and resale operations;
|
|
|
●
|
consolidating corporate and administrative functions;
|
|
|
●
|
consolidating sales and marketing operations;
|
|
|
●
|
identifying and eliminating redundant and underperforming operations and assets;
|
|
|
●
|
the retention of key employees;
|
|
|
●
|
the minimization of the diversion of management’s attention from ongoing business concerns; and
|
|
|
●
|
the possibility of tax costs or inefficiencies associated with the integration of the operations of the combined company.
|
An inability to realize the full extent of the anticipated benefits of the transaction, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of Hertz, which may affect adversely the value of the Hertz common stock after the completion of the offer and second-step merger.
In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual synergies, if achieved at all, may be lower than what Hertz expects and may take longer to achieve than anticipated. If Hertz is not able to adequately address these challenges, Hertz may be unable to successfully integrate Dollar Thrifty’s operations into its own, or to realize the anticipated benefits of the integration of the two companies.
The acquisition is subject to various regulatory approvals, and obtaining such approvals may delay or prevent Hertz’s acquisition of Dollar Thrifty or may require divestitures.
Hertz must receive approval from and/or make filings with various foreign, Federal and state regulatory agencies with respect to the acquisition of shares of Dollar Thrifty common stock in the offer. The governmental entities from which these approvals are required may impose conditions on the completion of the acquisition, require changes to the terms of the acquisition or impose additional obligations on regulated subsidiaries of Hertz and Dollar Thrifty. These conditions or changes could have the effect of delaying completion of the offer or imposing additional costs on or limiting the revenues of the combined company following the offer, any of which might have a material adverse effect on the combined company following completion of the offer. Under the HSR Act, the acquisition of shares of Dollar Thrifty common stock pursuant to the offer cannot be completed until Hertz has made required notifications and given certain information and materials to the FTC and/or the DOJ and until specified waiting period requirements have expired or terminated. Hertz cannot provide any assurance that the necessary approvals will be obtained or that there will not be any adverse consequences to Hertz’s or Dollar Thrifty’s business resulting from the failure to obtain these regulatory approvals or from conditions that could be imposed in connection with obtaining these approvals, including divestitures or other operating restrictions upon Hertz, Dollar Thrifty, the combined company or its subsidiaries. You should be aware that all required regulatory approvals may not be obtained in a timely manner, and this could result in a delay in the consummation of the offer. For a more detailed description of the regulatory approvals required in the offer and/or second-step merger, see “The Exchange Offer—Regulatory Approvals; Certain Other Legal Matters.”
Hertz will incur a substantial amount of indebtedness to acquire the shares of Dollar Thrifty common stock pursuant to the offer and second-step merger, to refinance a portion of Dollar Thrifty’s outstanding indebtedness, and to pay related fees and expenses.
Hertz cannot guarantee that the combined company will be able to generate sufficient cash flow to make all of the principal and interest payments under this indebtedness when such payments are due or that it will be able to refinance such indebtedness.
Hertz’s anticipated level of indebtedness, and covenant restrictions under its existing and future indebtedness, could adversely affect its operations and liquidity.
Hertz’s increased indebtedness following consummation of the offer and second-step merger could adversely affect Hertz’s operations and liquidity. Hertz’s anticipated level of indebtedness could, among other things:
|
|
●
|
make it more difficult for Hertz to pay or refinance its debts as they become due during adverse economic and industry conditions because Hertz may not have sufficient cash flows to make its scheduled debt payments;
|
|
|
●
|
cause Hertz to use a larger portion of its cash flow to fund interest and principal payments, reducing the availability of cash to fund working capital and capital expenditures and other business activities;
|
|
|
●
|
cause Hertz to be less able to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;
|
|
|
●
|
cause Hertz to be more vulnerable to general adverse economic and industry conditions;
|
|
|
●
|
cause Hertz to be disadvantaged compared to competitors with less leverage;
|
|
|
●
|
result in a downgrade in the credit rating of Hertz or any indebtedness of Hertz or its subsidiaries which could increase the cost of further borrowings; and
|
|
|
●
|
limit Hertz’s ability to borrow additional monies in the future to fund working capital, capital expenditures and other general corporate purposes.
|
The terms of Hertz’s indebtedness today and following the consummation of the offer are expected to include covenants that, among other things, restrict our ability to: (i) dispose of assets; (ii) incur additional indebtedness; (iii) incur guarantee obligations; (iv) prepay other indebtedness or amend other financing arrangements; (v) pay dividends; (vi) create liens on assets; (vii) enter into sale and leaseback transactions; (viii) make investments, loans, advances or capital expenditures; (ix) make acquisitions; (x) engage in mergers or consolidations; (xi) change the business conducted; and (xii) engage in certain transactions with affiliates.
Hertz has not negotiated the price or terms of the offer or second-step merger with Dollar Thrifty’s board of directors.
In evaluating this offer, you should be aware that Hertz has not negotiated the price or terms of the offer or second-step merger with Dollar Thrifty or its board of directors. Neither Dollar Thrifty nor its board of directors has approved the offer or second-step merger. Dollar Thrifty, however, is required under the rules of the SEC to issue a statement as to whether it recommends acceptance or rejection of the offer, that it expresses no opinion and remains neutral toward the offer or that it is unable to take a position with respect to the offer, and file with the SEC a solicitation/recommendation statement on Schedule 14D-9 describing its position, if any, and certain related information, no later than 10 business days from the date the offer is first published, sent or given to stockholders. Hertz recommends that you review this Schedule 14D-9 when it becomes available.
Since the termination of the 2010 Merger Agreement, Hertz has not had access to Dollar Thrifty’s non-public information. Therefore, Hertz may be subject to unknown liabilities of Dollar Thrifty which may have a material adverse effect on Hertz’s profitability, financial condition and results of operations.
Since the termination of the 2010 Merger Agreement, Hertz has only conducted a due diligence review of Dollar Thrifty’s publicly available information. The consummation of the offer may constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, or result in the termination, cancellation, acceleration or other change of any right or obligation (including, without limitation, any payment obligation) under agreements of Dollar Thrifty that are not publicly available. As a result, after the consummation of the offer, Hertz may be subject to unknown liabilities of Dollar Thrifty, which may have a material adverse effect on Hertz’s profitability, financial condition and results of operations.
In respect of all information relating to Dollar Thrifty presented in, incorporated by reference into or omitted from, this prospectus/offer to exchange, Hertz has relied upon publicly available information, including information publicly filed by Dollar Thrifty with the SEC. Although Hertz has no knowledge that would indicate that any statements contained herein regarding Dollar Thrifty’s condition, including its financial or operating condition, based upon such publicly filed reports and documents are inaccurate, incomplete or untrue, Hertz was not involved in the preparation of such information and statements. For example, Hertz has made adjustments and assumptions in preparing the pro forma financial information presented in this prospectus/offer to exchange that have necessarily involved Hertz’s estimates with respect to Dollar Thrifty’s financial information. Any financial, operating or other information regarding Dollar Thrifty that may be detrimental to Hertz following Hertz’s acquisition of Dollar Thrifty that has not been publicly disclosed by Dollar Thrifty, or errors in Hertz’s estimates, may have an adverse effect on Hertz’s financial condition or the benefits Hertz expects to achieve through the consummation of the offer.
Dollar Thrifty will be subject to business uncertainties and contractual restrictions while the offer and second-step merger are pending.
Uncertainty about the effect of the offer and second-step merger on employees and customers may have an adverse effect on Dollar Thrifty and consequently on the combined company following the second-step merger. These uncertainties may impair Dollar Thrifty’s ability to retain and motivate key personnel until and after the second-step merger is completed and could cause customers, suppliers, franchisees, partners (including airport authorities) and others that deal with Dollar Thrifty to defer entering into contracts with Dollar Thrifty or making other decisions concerning Dollar Thrifty or seek to change existing business relationships with Dollar Thrifty. If key employees depart because of uncertainty about their future roles and the potential complexities of the offer and second-step merger, the combined company’s business following the offer and second-step merger could be harmed.
Uncertainties associated with the offer and second-step merger may cause a loss of employees and may otherwise affect the future business and operations of Hertz and Dollar Thrifty.
Hertz’s success after the offer and second-step merger will depend in part upon its ability to retain key employees of Hertz and Dollar Thrifty. Prior to and following the offer and second-step merger, employees of Hertz and Dollar Thrifty may experience uncertainty about their roles with the combined company. This may adversely affect the ability of each of Hertz and Dollar Thrifty to attract or retain key management, sales, marketing, technical and other personnel. In addition, Hertz does not believe that Dollar Thrifty’s executive officers, including its Chief Executive Officer, are subject to any non-compete agreements. Hertz is also not aware of any retention plan in place to retain the services of the key employees of Dollar Thrifty. Key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the offer and second-step merger. As a result, the combined company may not be able to attract or retain key employees of Hertz and Dollar Thrifty to the same extent that those companies have been able to attract or retain their own employees in the past, which could have a negative impact on the business of Hertz, Dollar Thrifty or the combined company. If key employees depart, the integration of the companies may be more difficult and the combined company’s business following the offer and second-step merger could be harmed.
Future results of the combined company may differ materially from the Unaudited Pro Forma Condensed Combined Financial Information of Hertz and Dollar Thrifty presented in this prospectus/offer to exchange.
The future results of Hertz, as the combined company following the offer and second-step merger, may be materially different from those shown in the pro forma financial information presented in this prospectus/offer to exchange that show, based on certain assumptions, only a combination of Hertz’s and Dollar Thrifty’s historical results after giving effect to the offer and second-step merger. Hertz has estimated that acquisition-related fees and expenses for Hertz and Dollar Thrifty (excluding financing-related fees and expenses) for periods following March 31, 2011 could total approximately $55 million to $65 million. In addition, the final amount of any charges relating to acquisition accounting adjustments that Hertz may be required to record will not be known until following the closing of the second-step merger, in particular because Hertz does not currently have any access to information related to Dollar Thrifty beyond what Dollar Thrifty has made publicly available, and as a result Hertz’s estimates of fees and expenses that may be incurred by Dollar Thrifty in connection with the business combination are inherently imprecise. These expenses and charges may be higher or lower than estimated. In addition, the pro forma financial information presented herein is based on a variety of assumptions. If any one or more of these assumptions prove to be incorrect, the pro forma financial information presented herein could change materially.
The market price of Hertz common stock after the offer and second-step merger may be affected by factors different from those currently affecting Dollar Thrifty common stock.
The businesses of Hertz and Dollar Thrifty differ in many respects, including geographic base, customer base, product and service offerings, relationships with automotive suppliers and utilization of third-party licensees, and, accordingly, the results of operations of the combined company and the market price of shares of Hertz’s common stock after the offer and second-step merger may be affected by factors different from those currently affecting the independent results of operations of Dollar Thrifty. For a discussion of the businesses of Hertz and Dollar Thrifty and of certain factors to consider in connection with their respective businesses, see the documents incorporated by reference into this prospectus/offer to exchange and referred to under “Where You Can Find More Information.” See “Comparative Market Price and Dividend Information” for additional information on the historical market value of shares of Hertz common stock and Dollar Thrifty common stock.
The offer and second-step merger may not be accretive and may cause dilution to Hertz’s earnings per share, which may negatively affect the market price of Hertz common stock.
Hertz currently anticipates that the offer and second-step merger will be accretive to its annual earnings per share of common stock in the first full year following consummation of the transactions. This expectation is based on preliminary estimates, which may change materially. Hertz could also encounter additional transaction-related costs or other factors such as the failure to realize all of the benefits anticipated in the offer and second-step merger or the difficulty of managing a larger company. All of these factors could cause dilution to Hertz’s earnings per share or decrease or delay the expected accretive effect of the offer and second-step merger and cause a decrease in the market price of Hertz common stock.
The market for Hertz common stock may be adversely affected by the issuance of shares pursuant to the offer and second-step merger.
In connection with the completion of the offer and second-step merger, and as described and based on the assumptions in the section of this prospectus/offer to exchange entitled “The Exchange Offer—Ownership of Hertz After the Offer,” Hertz expects to issue approximately 24,723,000 shares of Hertz common stock. The issuance of these new shares of Hertz common stock could have the effect of depressing the market price for shares of our common stock.
The shares of Hertz common stock to be received by Dollar Thrifty stockholders as consideration will have different rights from the shares of Dollar Thrifty common stock.
Upon receipt of shares of Hertz common stock in the offer, Dollar Thrifty stockholders will become Hertz stockholders and their rights as stockholders will be governed by Hertz’s certificate of incorporation and Hertz’s by-laws. Certain of the rights associated with Dollar Thrifty common stock are different from the rights associated with Hertz common stock. See “Comparison of Stockholders’ Rights” for a discussion of the different rights associated with Hertz common stock.
Investment funds associated with Clayton, Dubilier & Rice, LLC, The Carlyle Group and BAML Capital Partners (formerly Merrill Lynch Global Private Equity) will continue to exercise significant control over Hertz’s management and policies, and may have interests that differ from yours.
Hertz is a party to an amended and restated stockholders’ agreement (the “Stockholders’ Agreement”), among it and investment funds associated with or designated by Clayton, Dubilier & Rice, LLC (“CD&R”), The Carlyle Group (“Carlyle”) and BAML Capital Partners (formerly Merrill Lynch Global Private Equity (“MLGPE”) (“BAMLCP”), together with CD&R and Carlyle, the “Sponsors”). Investment funds associated with or designated by the Sponsors currently beneficially own, in the aggregate, approximately 39% of the outstanding shares of our common stock, and upon consummation of the offer and second-step merger, the Sponsors will own approximately 36% of the outstanding shares of Hertz’s common stock (assuming there are no further purchases or sales of common stock by any Sponsor prior to consummation of the offer and second-step merger). Pursuant to the Stockholders’ Agreement, each of the funds has agreed to vote in favor of the other funds’ nominees (the “Sponsor Nominees”) to Hertz’s board of directors. The Sponsors currently exercise, and will continue to exercise, significant influence over our board of directors and matters requiring stockholder approval and our management, policies and affairs for so long as the investment funds associated with or designated by the Sponsors continue to hold a significant amount of our common stock. There can be no assurance that the interests of the Sponsors will not conflict with those of our other stockholders. The Sponsors currently have the ability to significantly influence the vote on any transaction that requires the approval of stockholders, including many possible change in control transactions, and may discourage or prevent any such transaction regardless of whether or not our other stockholders believe that such a transaction is in Hertz’s or their own best interests. See “Description of Hertz Global Holdings, Inc. Capital Stock—Stockholders’ Agreement” for additional information on the Stockholders’ Agreement.
Additionally, the Sponsors may from time to time acquire and hold interests in businesses that compete directly with us. One or more of the Sponsors may also pursue acquisition opportunities and other corporate opportunities that may be complementary to our business and as a result, those opportunities may not be available to us.
Dollar Thrifty stockholders will have a reduced ownership and voting interest after the consummation of the offer and second-step merger and will exercise less influence over the management and policies of Hertz than they do over Dollar Thrifty.
Dollar Thrifty stockholders currently have the right to vote in the election of the board of directors of Dollar Thrifty and on other matters affecting Dollar Thrifty. When the shares tendered in the offer are exchanged, each participating Dollar Thrifty stockholder (and following consummation of the second-step merger, each Dollar Thrifty stockholder) will become a stockholder of Hertz with a percentage ownership of the combined company that is much smaller than the stockholder’s percentage ownership of Dollar Thrifty. Based on certain assumptions regarding the number of Dollar Thrifty shares to be exchanged and the number of Hertz shares that will be outstanding, Hertz estimates that, if all shares of Dollar Thrifty common stock are exchanged pursuant to the offer and second-step merger, former Dollar Thrifty stockholders would own, in the aggregate, approximately 5.6% of the outstanding shares of Hertz common stock. Because of this, and the significant holdings of Hertz common stock by investment funds associated with the Sponsors, Dollar Thrifty stockholders will have less influence over the management and policies of Hertz than they now have over the management and policies of Dollar Thrifty.
Hertz will incur significant transaction-related costs in connection with the offer and second-step merger.
Hertz expects to incur a number of non-recurring costs associated with combining the operations of the two companies. Most of these costs will be comprised of transaction costs related to the offer, second-step merger, facilities, fleet and systems consolidation costs and employment-related costs. Hertz will also incur transaction fees and costs related to formulating integration plans. Additional unanticipated costs may be incurred in the integration of the two companies’ businesses. Although Hertz expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Hertz to offset incremental transaction-related costs over time, this net benefit may not be achieved in the near term, or at all.
Hertz may pursue strategic transactions in the future, which could be difficult to implement, disrupt its business or change its business profile significantly.
Hertz will continue to consider opportunistic strategic transactions, which could involve acquisitions or dispositions of businesses or assets. Any future strategic transaction could involve numerous risks, including:
|
|
●
|
potential disruption of Hertz’s ongoing business and distraction of management;
|
|
|
●
|
difficulty integrating acquired businesses or segregating assets to be disposed of;
|
|
|
●
|
exposure to unknown and/or contingent or other liabilities, including litigation arising in connection with the acquisition or disposition of, and/or against, any businesses Hertz may acquire; and
|
|
|
●
|
changing Hertz’s business profile in ways that could have unintended consequences.
|
If Hertz enters into significant strategic transactions in the future, related accounting charges may affect its financial condition and results of operations, particularly in the case of any acquisitions. In addition, the financing of any significant acquisition may result in changes in its capital structure, including the incurrence of additional indebtedness. Conversely, any material disposition could reduce its indebtedness or require the amendment or refinancing of a portion of its outstanding indebtedness. Hertz may not be successful in addressing these risks or any other problems encountered in connection with any strategic transactions.
The offer could trigger certain provisions contained in Dollar Thrifty’s employee benefit plans or agreements that could require Hertz to make change of control payments or permit a counter-party to an agreement with Dollar Thrifty to terminate that agreement.
Certain of Dollar Thrifty’s employee benefit plans or agreements contain change of control clauses providing for compensation to be granted to certain members of Dollar Thrifty senior management either upon a change of control, or if, following a change of control (and, in the case of Mr. Thompson, Dollar Thrifty’s Chief Executive Officer, prior to a change of control, but following the commencement of any action by or discussion with a third party that ultimately results in a change of control) Dollar Thrifty terminates the employment relationship between Dollar Thrifty and these employees under certain circumstances, or if these employees terminate the employment relationship because of certain adverse changes and, in the case of Mr. Thompson, for any reason, or without reason, during the 30-day period following the one-year anniversary of a change of control. If successful, the offer would constitute a change of control of Dollar Thrifty, thereby giving rise to potential change of control payments.
Because Hertz has not had the opportunity to review Dollar Thrifty’s non-public information since the 2010 Merger Agreement terminated, there may be other agreements that permit a counter-party to terminate an agreement because the offer or second-step merger would cause a default or violate an anti-assignment, change of control or similar clause. If this happens, Hertz may have to seek to replace that agreement with a new agreement. Hertz cannot assure you that it will be able to replace a terminated agreement on comparable terms or at all. Depending on the importance of a terminated agreement to Dollar Thrifty’s business, failure to replace that agreement on similar terms or at all may increase the costs to Hertz of operating Dollar Thrifty’s business or prevent Hertz from operating part or all of Dollar Thrifty’s business.
The stock prices and businesses of Hertz and Dollar Thrifty may be adversely affected if the offer and second-step merger are not completed.
Completion of the offer and second-step merger are subject to certain conditions, including, among others, obtaining requisite regulatory approvals. Hertz and Dollar Thrifty may be unable to obtain such approvals on a timely basis or at all. If the offer and second-step merger are not completed, the prices of Hertz common stock and Dollar Thrifty common stock may decline to the extent that the current market prices of Hertz common stock and Dollar Thrifty common stock reflect a market assumption that the offer and second-step merger will be completed.
In addition, there may be uncertainty surrounding the future direction of the product and service offerings and strategy of Hertz or Dollar Thrifty on a stand-alone basis and Hertz or Dollar Thrifty may experience negative reactions from the financial markets and from their respective customers, employees, franchisees and licensees. If the offer and second-step merger are not completed, Hertz and Dollar Thrifty cannot assure their stockholders that the risks described above will not materialize and will not materially affect the business, financial results and stock prices of Hertz or Dollar Thrifty.
Risk Factors Relating to Hertz’s Business
You should read and consider risk factors specific to Hertz’s businesses that will also affect the combined company after the offer and second-step merger, described in Part I, Item 1A of the Hertz 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed by Hertz with the SEC and incorporated by reference into this document. See “Where You Can Find More Information” for the location of information incorporated by reference in this prospectus/offer to exchange.
Risk Factors Relating to Dollar Thrifty’s Business
You should read and consider risk factors specific to Dollar Thrifty’s businesses that Hertz believes would be applicable to the combined company after the offer and second-step merger, described in Part I, Item 1A of the Dollar Thrifty 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed by Dollar Thrifty with the SEC and are incorporated by reference into this document. See “Where You Can Find More Information” for the location of information incorporated by reference in this prospectus/offer to exchange. Since the termination of the 2010 Merger Agreement, Hertz has not had the opportunity to conduct comprehensive due diligence on Dollar Thrifty and to evaluate fully the extent to which these risk factors will affect the combined company.
Hertz is a corporation incorporated in Delaware on July 15, 2005 with principal executive offices at 225 Brae Boulevard, Park Ridge, New Jersey 07656-0713. The telephone number of Hertz’s principal executive offices is (201) 307-2000. Hertz’s common stock is listed on the NYSE under the symbol “HTZ.”
Hertz owns what it believes is the largest worldwide airport general use car rental brand, operating from approximately 8,500 locations in approximately 150 countries as of March 31, 2011. The Hertz brand name is one of the most recognized in the world, signifying leadership in quality rental services and products. Hertz operates both corporate and licensee locations in cities and airports in North America, Europe, Latin America, Australia, Asia and New Zealand. In addition, Hertz has licensee locations in cities and airports in Africa and the Middle East. Hertz also rents equipment through approximately 320 branches in the United States, Canada, France, Spain, Italy, China and Saudi Arabia, as well as through its international licensees. Hertz and its predecessors have been in the car rental business since 1918 and in the equipment rental business since 1965.
Purchaser is a Delaware corporation incorporated on April 23, 2010, with principal executive offices at 225 Brae Boulevard, Park Ridge, New Jersey 07656-0713. The telephone number of Purchaser’s principal executive offices is (201) 307-2000. Purchaser is a wholly owned subsidiary of Hertz that was formed to facilitate the transactions contemplated by the 2010 Merger Agreement. Purchaser has engaged in no activities to date and has no material assets or liabilities of any kind, in each case other than those incidental to its formation and its activities and obligations in connection with the 2010 Merger Agreement and the offer.
Dollar Thrifty is a corporation incorporated in Delaware on November 4, 1997, with principal executive offices at 5330 East 31st Street, Tulsa, Oklahoma 74135. The telephone number of Dollar Thrifty’s principal executive offices is (918) 660-7700. Dollar Thrifty’s common stock is listed on the NYSE under the symbol “DTG.”
Through its Dollar Rent A Car and Thrifty Car Rental brands, Dollar Thrifty has been serving value-conscious leisure and business travelers since 1950. Dollar Thrifty maintains a strong presence in domestic leisure travel in virtually all of the top U.S. and Canadian airport markets, and also derives a significant portion of its revenue from international travelers to the U.S. under contracts with various international tour operators. Dollar and Thrifty have approximately 300 corporate locations in the United States and Canada, with approximately 6,000 employees located mainly in North America. In addition to its corporate operations, Dollar Thrifty maintains global service capabilities through an expansive franchise network of approximately 1,275 franchises in 82 countries.
Over the past several years, Hertz’s board of directors has from time to time engaged with its senior management to review and discuss potential strategic alternatives, and has considered ways to enhance its performance and prospects in light of competitive and other relevant developments. These reviews and discussions have focused on, among other things, the business environment facing the car rental industry generally and each respective company in particular, as well as conditions in the automotive industry and the debt financing markets. These reviews have also included periodic discussions with respect to potential transactions, including potential transactions with Dollar Thrifty, that would further its strategic objectives and enhance shareholder value, and the potential benefits and risks of those transactions.
In March 2007, Enterprise Rent-a-Car announced that it had entered into an agreement to acquire Vanguard Car Rental, owner of the National and Alamo car rental brands.
On April 3, 2007, Dollar Thrifty’s then President and Chief Executive Officer, Gary L. Paxton, and Hertz’s Chairman and Chief Executive Officer, Mark P. Frissora, had a telephone conversation in which each expressed interest in evaluating a potential business combination between Dollar Thrifty and Hertz. On April 9, 2007, Dollar Thrifty and Hertz executed a confidentiality agreement and conducted preliminary reciprocal due diligence. On April 17, 2007, members of senior management of each of Dollar Thrifty and Hertz met in person in Chicago to discuss such a transaction, including, among other things, related antitrust considerations and timing. Shortly after this meeting, Dollar Thrifty and Hertz terminated their discussions.
In October 2007, Avis Budget Group, Inc. (“Avis”) submitted a non-binding indication of interest for a possible business combination with Dollar Thrifty at a price of $44 per share of Dollar Thrifty common stock, of which 58% would be in cash and 42% would be in the form of Avis common stock. Dollar Thrifty, Avis, J.P. Morgan, which was retained pursuant to an engagement letter dated November 7, 2007 as a financial advisor to Dollar Thrifty, Dollar Thrifty’s legal counsel, Cleary Gottlieb Steen & Hamilton LLP, referred to as Cleary, and Avis’s financial and legal advisors engaged in reciprocal due diligence and negotiations in furtherance of the proposed transaction, as well as discussions with respect to related antitrust considerations. On December 4, 2007, Avis advised Dollar Thrifty that it was revising its proposed purchase price to $35.50 per share of Dollar Thrifty common stock, to consist of $13.01 in Avis stock, $18.99 in cash and shares of a new series of Avis participating preferred stock having a value (based on the Black-Scholes valuation model) of $3.50, and that its revised indication of interest would be subject to further due diligence. Trading in Dollar Thrifty common stock closed at $24.12 on December 4, 2007. Dollar Thrifty indicated to Avis that Dollar Thrifty would consider Avis’s revised indication of interest, but that transaction certainty was also of paramount importance, and that Avis’s willingness to agree to strong divestiture commitments and meaningful reverse termination fees to address antitrust-related concerns would be critical factors for consideration by Dollar Thrifty’s board of directors. Avis stated that it was willing to make unspecified limited divestitures, but would not agree to Dollar Thrifty’s request for a reverse termination fee that would be payable in the event that antitrust approval was not ultimately obtained. In early January 2008, Dollar Thrifty and Avis mutually agreed to terminate their discussions.
In March 2008, Mr. Paxton contacted each of Mr. Frissora and Ronald L. Nelson, chairman and chief executive officer of Avis, to inquire as to whether their respective companies would be interested in re-engaging in discussions regarding a business combination with Dollar Thrifty. On March 20, 2008, Avis submitted a non-binding indication of interest to acquire Dollar Thrifty for consideration consisting of 85% Avis common stock and 15% cash at a premium of up to 5% to the market price for Dollar Thrifty common stock. Trading in Dollar Thrifty common stock closed at $13.74 per share on that day.
On or about March 24, 2008, following a meeting of Hertz’s board of directors during which the possibility of a combination with Dollar Thrifty was discussed, Mr. Frissora had a follow-up conversation with Mr. Paxton in which he indicated that Hertz would be interested in exploring such a transaction, proposing a 20-30% premium to the then-current price of Dollar Thrifty common stock and consideration consisting of 80% Hertz common stock and 20% cash.
On March 31, 2008, Avis sent Dollar Thrifty a follow-up letter reiterating the benefits of a combination of the two businesses and emphasizing synergies of $5.00 to $10.00 per share of Dollar Thrifty common stock.
The Dollar Thrifty board of directors met on March 31, 2008 with members of Dollar Thrifty’s senior management and J.P. Morgan to discuss the responses of Hertz and Avis. The Dollar Thrifty board of directors met again on April 7, 2008 with members of Dollar Thrifty’s senior management, J.P. Morgan and Cleary. After further discussion of the responses of Hertz and Avis, the Dollar Thrifty board of directors approved Dollar Thrifty’s engagement with Hertz and Avis to discuss a potential sale of Dollar Thrifty.
In early April 2008, Mr. Paxton and J.P. Morgan had conversations with each of Hertz and Avis, in which Mr. Paxton indicated that Dollar Thrifty would be receptive to an all-stock offer representing a 20-30% premium to the then-current price of Dollar Thrifty common stock. Each of Hertz and Avis indicated a preference for a mixture of cash and stock consideration. Also in April and May 2008, Dollar Thrifty executed confidentiality agreements with four parties, including Hertz and Avis, following which Dollar Thrifty, Hertz and Avis began conducting reciprocal due diligence. Discussions with the other two parties, both of which were car rental companies based outside of the United States, were terminated by the counterparties shortly thereafter without either party engaging in any due diligence. One party cited general conditions in the capital markets, which created challenges for financing a transaction, as its reason for terminating discussions. The standstill provisions in each of the confidentiality agreements expired in 2009. The closing price of Dollar Thrifty common stock on April 11, 2008, the date on which Hertz and Avis executed their confidentiality agreements, was $14.60.
During May 2008, Dollar Thrifty, Hertz and Avis, together with their respective advisors, continued their reciprocal due diligence investigations. On May 9, 2008, J.P. Morgan circulated to each of Hertz and Avis a process letter describing, among other things, the procedures and timing to be followed in connection with the submission of written proposals regarding a potential transaction with Dollar Thrifty. While both Hertz and Avis were made aware that their interest was being solicited in the context of a formal auction process, Dollar Thrifty did not disclose to either party the number or the identities of the other parties involved in the process.
On May 15, 2008, Hertz’s board of directors met and discussed Hertz’s preliminary due diligence findings and the advantages and risks of a transaction with Dollar Thrifty, as well as the potential terms of such a transaction. One of the principal concerns raised at this meeting was Dollar Thrifty’s vehicle supply agreement with Chrysler, pursuant to which Dollar Thrifty was then obligated to purchase 75% of its rental vehicles from Chrysler during a given year, up to certain targeted volumes.
On May 19, 2008, Avis submitted a non-binding indication of interest to acquire Dollar Thrifty for consideration consisting entirely of Avis common stock at a premium of up to 15% to the market price for Dollar Thrifty common stock at the time of signing of a merger agreement for a transaction (assuming that the market price was “undisturbed” by transaction rumors). Trading in Dollar Thrifty common stock closed at $15.01 on that date. Avis’s indication of interest was conditioned upon Avis’s satisfaction with: the amount of fleet financing expected or required to be refinanced and the cost to be incurred in connection therewith; the amount of synergies available to be created by the combination; and the terms and conditions of Dollar Thrifty’s risk and program vehicle purchases from Chrysler in model year 2009 and how such terms and conditions would apply in the context of the transaction. Avis proposed retaining certain of Dollar Thrifty’s functions and centralizing certain of the combined company’s functions in Tulsa, Oklahoma, the location of Dollar Thrifty’s headquarters, and appointing two Dollar Thrifty representatives to the Avis board of directors upon consummation of a transaction. Avis also stated that it was open to having the consideration consist of a combination of cash and an amount of Avis common stock equal to less than 19.9% of the Avis shares then outstanding, meaning that the transaction would not need to be conditioned on a vote of Avis’s stockholders.
On May 20, 2008, Hertz submitted a non-binding indication of interest to acquire all of the shares of Dollar Thrifty. Hertz stated in the indication of interest that it was prepared to offer a price representing a 20% premium over an unaffected market price for Dollar Thrifty shares, excluding any perceived effect of an expected transaction. The closing price of Dollar Thrifty common stock on May 20, 2008 was $15.03. Hertz indicated that 80% of the proposed merger consideration would be comprised of Hertz stock and the remaining 20% would consist of cash, and that obtaining commitments for an expanded fleet financing facility would be a condition to signing a definitive merger agreement. Hertz also proposed appointing one Dollar Thrifty representative to the Hertz board of directors upon consummation of a transaction. Hertz also requested a four-week exclusivity period as a condition to proceeding with the transaction.
On May 21, 2008, the Dollar Thrifty board of directors met to consider the indications of interest from Avis and Hertz. After discussion, the Dollar Thrifty board of directors approved the continuation of discussions with Avis and Hertz regarding a potential sale of the company.
On May 24, 2008, Dollar Thrifty representatives responded to Hertz’s indication of interest, expressing some disappointment with its content but also expressing an understanding of Hertz’s preliminary due diligence concerns, which included the vehicle supply agreement with Chrysler and the present and future mix of Chrysler program and risk vehicles in Dollar Thrifty’s fleet. Dollar Thrifty also indicated in its response that at least one other major domestic car rental company was participating in its process for exploring potential transactions. In early June 2008, after receiving Dollar Thrifty’s consent, Mr. Frissora and other members of Hertz senior management, including Hertz’s Chief Financial Officer, Elyse Douglas, and Hertz’s then-President of Vehicle Rental Leasing for the Americas and Pacific, Joseph R. Nothwang, met with Chrysler representatives to discuss Chrysler’s financial condition and outlook for the future.
Also in early June 2008, Dollar Thrifty provided Hertz and Avis with a draft Agreement and Plan of Merger, prepared by Cleary. No other parties were engaged in the process at that time.
On June 12, 2008, Avis advised Dollar Thrifty that it was no longer interested in pursuing a merger with Dollar Thrifty due to challenging economic conditions and difficulties in the financing markets. In lieu of a merger, Avis proposed a complex transaction under which Dollar Thrifty would license certain of its business territories to Avis while operating the rest of its business independently. Given the legal and operational complexities identified by Dollar Thrifty in connection with the structure described by Avis, Dollar Thrifty declined to pursue this proposal, and the parties terminated their discussions.
Discussions between Dollar Thrifty and Hertz senior management continued during July and early August 2008.
In July 2008, a party, which at the time was engaged in the car rental business and has since ceased operations, delivered an unsolicited indication of interest to Dollar Thrifty. The proposal contemplated the acquisition of Dollar Thrifty common stock at a price of $8.50 per share in cash, subject to satisfactory completion of due diligence and receipt of necessary financing. On July 3, 2008, trading in Dollar Thrifty common stock closed at $3.18 per share. At a meeting on July 24, 2008, Dollar Thrifty’s board of directors discussed this proposal, as well as the status of the Hertz discussions, with Dollar Thrifty’s management, J.P. Morgan and Cleary. Dollar Thrifty’s management and J.P. Morgan expressed their view that the company making this proposal would have difficulty obtaining the necessary financing, and otherwise did not have the financial strength to pursue the proposed transaction. Dollar Thrifty declined to pursue further discussions with this company.
On August 14, 2008, Hertz’s board of directors met and again discussed a possible strategic transaction with Dollar Thrifty. Hertz’s board of directors decided not to pursue a transaction at that time, due to factors including the uncertainty of the financial markets, concerns with respect to Dollar Thrifty’s liquidity and concerns with respect to Dollar Thrifty’s vehicle supply agreement with Chrysler and Chrysler’s deteriorating financial condition. The closing price of Dollar Thrifty common stock on August 14, 2008 was $3.73.
On November 14, 2008, Mr. Frissora contacted Scott L. Thompson, who had succeeded Mr. Paxton as Dollar Thrifty’s President and Chief Executive Officer, to suggest the possibility of reviving discussions regarding a business combination between Dollar Thrifty and Hertz. On November 18, 2008, Dollar Thrifty’s board of directors instructed Dollar Thrifty management to reengage in merger discussions with Hertz.
On December 12, 2008, following a further decline in the trading price of Dollar Thrifty common stock, Hertz submitted a revised non-binding indication of interest to acquire all of the shares of Dollar Thrifty at a price of $2.00 a share, comprised of $0.50 in cash and 0.44 shares of Hertz common stock, which represented a premium of approximately 77% to the closing price of Dollar Thrifty common stock on that date. Hertz stated in this indication of interest that it would require the rollover of Dollar Thrifty’s existing fleet financing as a condition to a transaction. Hertz offered to appoint one Dollar Thrifty representative to Hertz’s board of directors upon consummating a transaction. Hertz also requested an exclusivity period to conduct diligence and negotiate a merger agreement. Dollar Thrifty’s board of directors met on December 15, 2008 to consider Hertz’s proposal, and concluded that in the board’s judgment, after consultation with Dollar Thrifty’s senior management and J.P. Morgan, the offer was inadequate. Mr. Thompson communicated the Dollar Thrifty board of directors’ rejection of Hertz’s offer in a telephone conversation with Mr. Frissora on December 22, 2008, citing Hertz’s valuation of Dollar Thrifty and the proposed contingency with respect to Dollar Thrifty’s existing fleet financing as Dollar Thrifty’s two principal issues with Hertz’s proposal. The closing price of Dollar Thrifty common stock on that date was $1.09.
On January 19, 2009, Hertz submitted a further revised non-binding indication of interest to acquire all of the shares of Dollar Thrifty at a price of $3.50 per share, composed of $0.85 in cash and 0.50 shares of Hertz common stock, which represented a premium of approximately 176% to the closing price of Dollar Thrifty common stock on that date. Hertz also indicated that, given the strained debt markets and reduced liquidity in the banking sector at such time, it would require the rollover of half of Dollar Thrifty’s existing fleet financing. Hertz reiterated its request for an exclusivity period that was previously made in December 2008.
On January 29, 2009, Dollar Thrifty’s board of directors met with J.P. Morgan and Cleary to discuss Hertz’s revised proposal. After consideration of, and in view of, the risks and challenges of remaining independent in the then highly troubled economic and industry environments, the Dollar Thrifty board of directors determined to authorize and direct Mr. Thompson to engage Hertz in discussions with respect to its proposal. The Dollar Thrifty board of directors also determined that, in its judgment, $7.50 per share of Dollar Thrifty common stock would be an appropriate price to propose to Hertz in the context of such discussions. On February 3, 2009, Dollar Thrifty responded to Hertz’s latest indication of interest in a letter from Mr. Thompson, noting that Dollar Thrifty’s board of directors believed that an appropriate valuation of Dollar Thrifty would be $7.50 per share. Mr. Thompson also indicated that Dollar Thrifty’s board of directors had a strong preference for 100% stock consideration, given the view of Dollar Thrifty’s board of directors that both companies’ stocks were significantly undervalued. Mr. Thompson emphasized that certainty of closing a transaction was especially important to Dollar Thrifty’s board of directors and management. Dollar Thrifty again rejected any contingency in a transaction related to Dollar Thrifty’s existing fleet financing and informed Hertz that Dollar Thrifty’s board of directors expected Hertz to bear the burden of any conditions imposed by regulatory agencies. The closing price of Dollar Thrifty common stock on that date was $1.24.
During a February 24, 2009 telephone conversation with Mr. Thompson, Mr. Frissora indicated that Hertz might still be willing to pursue a transaction at an offer price of $3.50 per Dollar Thrifty share. After consulting with the Dollar Thrifty board of directors, Mr. Thompson indicated that Dollar Thrifty would not be interested in pursuing a transaction with Hertz at a price below $5.25 to $5.50 per share. The closing price of Dollar Thrifty common stock on February 24, 2009 was $0.88 per share.
On March 22, 2009, Dollar Thrifty held a meeting of its board of directors at which it was decided that in light of conditions in the financing markets and the car rental industry, any merger transaction would be extraordinarily difficult to execute, and that day-to-day business operations in light of the challenging economic and industry environments facing the company required the full attention of Dollar Thrifty’s management. Following that decision, on March 23, 2009, Mr. Thompson sent Mr. Frissora a letter advising Hertz that Dollar Thrifty had concluded that a transaction with Hertz on terms acceptable to Dollar Thrifty could not be accomplished at that time. The closing price of Dollar Thrifty common stock on March 23, 2009 was $1.07. In a telephone call on March 25, 2009, Mr. Frissora informed Mr. Thompson that Hertz had reached the same conclusion due to uncertainties in the financial markets and the particular challenges facing Dollar Thrifty at such time. Hertz and Dollar Thrifty therefore determined to cease all discussions and related work with respect to a transaction.
In April 2009, Hertz acquired Advantage Rent A Car.
On April 30, 2009, Chrysler filed a voluntary petition for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. On August 4, 2009, Dollar Thrifty and Chrysler executed a new vehicle supply agreement that substantially reduced Dollar Thrifty’s vehicle purchase commitments to Chrysler and allowed for greater flexibility and diversification of Dollar Thrifty’s fleet. The closing price of Dollar Thrifty common stock on April 30, 2009 was $3.76 and the closing price of Dollar Thrifty common stock on August 4, 2009 was $17.53. In 2009, Dollar Thrifty also entered into a long-term vehicle supply agreement with Ford Motor Company and began working closely with General Motors and Nissan to help diversify the fleet and mitigate loss exposure to any one auto manufacturer.
On December 4, 2009, following a discussion among Hertz senior management and representatives of Hertz’s then majority stockholders, Mr. Frissora called Mr. Thompson, to explore whether Dollar Thrifty might be interested in restarting discussion of a potential business combination given recent improvements in the financial markets. After a discussion with Dollar Thrifty’s board of directors, Mr. Thompson communicated to Mr. Frissora on December 7, 2009 that Dollar Thrifty’s board of directors was open to such a discussion. The closing price of Dollar Thrifty common stock on December 7, 2009 was $21.76.
Dollar Thrifty and Hertz executed a confidentiality agreement on December 10, 2009. Hertz subsequently requested that certain financial and legal advisors provide assistance in connection with the potential transaction: Barclays Capital Inc., referred to as Barclays and Bank of America Merrill Lynch, referred to as BofA Merrill Lynch, as financial advisors, Debevoise & Plimpton LLP, referred to as Debevoise, as legal and co-regulatory counsel, and Jones Day, as co-regulatory counsel.
On December 21, 2009, members of Dollar Thrifty and Hertz senior management held a telephone conference to discuss high-level due diligence matters. At the conclusion of that call, Mr. Thompson requested a written indication of interest from Hertz.
On December 22, 2009, Hertz submitted a non-binding indication of interest to acquire all of the shares of Dollar Thrifty at a price of $30.00 per share, consisting of $15.00 in cash and $15.00 in Hertz common stock. Hertz also requested a 45-day exclusivity period to conduct diligence and negotiate a merger agreement. On December 23, 2009, Mr. Thompson reported to Mr. Frissora that Dollar Thrifty’s board of directors would meet to consider Hertz’s latest indication of interest and would respond during the first week of 2010. The closing price of Dollar Thrifty common stock on that date was $26.90.
On December 29, 2009, Dollar Thrifty engaged Goldman, Sachs & Co., referred to as Goldman Sachs and J.P. Morgan as a financial advisors.
On December 30, 2009, Dollar Thrifty’s board of directors met to discuss Hertz’s indication of interest. At the meeting, representatives of Cleary reviewed the fiduciary obligations of the directors in connection with the consideration of a strategic opportunity such as that proposed by Hertz, including the “Revlon” duties that may arise in such a situation. The Dollar Thrifty board of directors also received a presentation from Dollar Thrifty’s financial advisors of their preliminary financial analysis. The materials provided to the Dollar Thrifty board of directors also included a summary of the historic standalone capital structures, including debt, of Hertz and Avis. Following discussion with Dollar Thrifty’s financial advisors, the Dollar Thrifty board of directors determined that it would be preferable if a substantial portion of the merger consideration in a transaction with Hertz were in the form of cash in light of the risk of a double dip recession, the continued volatility in the equity markets and the lengthy period of time that would likely be required to close any transaction. As before, transaction certainty was of paramount importance to the board of directors, and the directors reviewed with representatives of Cleary the regulatory issues that might arise in connection with a transaction with Hertz. The Dollar Thrifty board of directors also discussed other potential transaction partners, including Avis, and the financing and regulatory issues that might arise in a potential business combination with such parties. However, the members of the board of directors were concerned that Hertz would not participate in an auction and that other potential bidders, including Avis, would face difficulty given the unfavorable lending market for highly leveraged companies. In this regard, Dollar Thrifty’s board of directors also considered Dollar Thrifty’s history of numerous unsuccessful efforts to sell the company.
On December 31, 2009, Dollar Thrifty responded to Hertz’s indication of interest in a letter that highlighted several areas for further discussion. Dollar Thrifty indicated that it would be willing to continue negotiations if, among other things, Hertz’s proposed value to Dollar Thrifty stockholders was “at least in the mid-thirties” per share, a range established by Dollar Thrifty’s board of directors in its judgment after consultation with Dollar Thrifty’s financial advisors and senior management. While Dollar Thrifty stated a preference for all-cash consideration, it also indicated a willingness to receive Hertz common stock, subject to appropriate representation on Hertz’s board of directors. Dollar Thrifty informed Hertz that, aside from price, the most important issue to Dollar Thrifty’s board of directors was transaction certainty, particularly as it related to receipt of required antitrust approvals. Dollar Thrifty also requested additional detail with regard to Hertz’s plans for the integration of the companies. The closing price of Dollar Thrifty common stock on that date was $25.61.
On January 7, 2010, at the request of Hertz and Dollar Thrifty, the parties’ respective financial advisors met to discuss certain financial aspects of a potential transaction, during which representatives of Barclays requested discussions with Dollar Thrifty management regarding Dollar Thrifty’s business and potential transaction synergies. On January 18, 2010, senior management of Dollar Thrifty and Hertz met to discuss the proposed transaction, including potential synergies related to information technology, fleet management and flexibility in cash management and financing. Dollar Thrifty management also provided additional information regarding Dollar Thrifty’s business, including its revenue sources and the mix, mileage, depreciation and disposition of its fleet. Throughout January 2010, at the request of Hertz and Dollar Thrifty, the parties’ respective financial advisors continued discussions regarding financial aspects of a potential transaction.
During January and February 2010, Messrs. Thompson and Frissora communicated several times regarding a potential transaction, including the status of their respective companies’ and advisors’ due diligence efforts. In the course of these discussions, Mr. Frissora noted certain provisions in Hertz’s publicly available debt agreements that would limit Hertz’s flexibility after consummating an all-cash transaction, and further noted that these issues would not be alleviated by the availability to Hertz of Dollar Thrifty’s cash reserves following a merger. After confirming the existence of such provisions, Mr. Thompson suggested that this issue could be addressed by having Dollar Thrifty pay an extraordinary dividend from its cash reserves immediately prior to the merger as part of the transaction.
On January 25, 2010, Hertz submitted a new non-binding indication of interest to acquire all of the shares of Dollar Thrifty common stock at a price of $35.00 per share, consisting of $21.00 in cash and $14.00 in Hertz common stock. That indication of interest also reiterated Hertz’s request for a 45-day exclusivity period to conduct diligence and negotiate a merger agreement. The trading price of Dollar Thrifty common stock closed at $24.22 on that date.
On January 25 and 26, 2010, Messrs. Thompson and Frissora held a series of telephone calls discussing Hertz’s new indication of interest. In these calls, Mr. Thompson focused on certainty of completion of the transaction, potential adjustments to the stock component of the merger consideration, and Dollar Thrifty representation on Hertz’s board of directors.
On January 27, 2010, Dollar Thrifty’s board of directors met to discuss, among other things, Hertz’s new indication of interest. At the meeting, the board of directors received presentations from Dollar Thrifty’s senior management, Dollar Thrifty’s financial advisors and Cleary with respect to Hertz’s proposal. Mr. Thompson updated the Dollar Thrifty board of directors on the operations and risk management of Dollar Thrifty, including the current rate environment, fleet costs, vehicle funding and the general outlook for 2010. The board of directors also discussed whether other potentially interested parties, particularly Avis and certain European-based car rental companies, should also be contacted. In this regard, the board discussed with Dollar Thrifty’s financial advisors the ability of Avis to raise sufficient financing to make a competitive cash bid in light of its capital structure and the state of the debt financing markets at the time, as well as the impact the state of such markets might have on the ability of private equity buyers to effect an acquisition of Dollar Thrifty. Dollar Thrifty’s board of directors discussed the likelihood that, in light of the state of the financing markets, Avis would need to offer a significant portion of any merger consideration in the form of Avis common stock, and that this would likely cause any transaction with Avis to require the approval of Avis’s stockholders under the rules of the New York Stock Exchange. The board of directors further discussed with representatives of Cleary the relative antitrust-related risks associated with a combination with Avis, as compared with such risks arising from a combination with Hertz, including the risk that Avis’s ownership of the Budget leisure car rental brand would invite additional regulatory scrutiny. The Dollar Thrifty board of directors also discussed the fact that rental car companies from Europe would not be able to gain the benefit of synergies that a U.S.-based purchaser would likely be able to recognize and thus would have difficulty in offering a competitive price for Dollar Thrifty. The board of directors also noted that in light of Dollar Thrifty’s extensive history of failed merger efforts, rumors of new merger-related discussions could be highly disruptive and demoralizing for the company’s employees. The board of directors recognized that the risk of such rumors would be increased to the extent that Dollar Thrifty actively inquired as to the level of interest of other parties. In discussion with representatives of Cleary, Dollar Thrifty’s board of directors also considered that appropriate deal protection provisions that would typically be contained in a merger agreement, such as termination fees, should not preclude another interested bidder from making a bid after the signing of a definitive transaction agreement. Based on all of these considerations, the Dollar Thrifty board of directors determined not to contact other parties at that time and authorized Dollar Thrifty’s management to execute a limited 45-day exclusivity agreement (provided that it could be terminated at an earlier date by Dollar Thrifty in certain circumstances) and to engage in due diligence and negotiations with Hertz.
On February 1, 2010, Mr. Thompson telephoned Mr. Frissora to report that Dollar Thrifty’s board of directors had authorized Dollar Thrifty’s management to enter into an exclusivity agreement with Hertz. Mr. Thompson noted that Dollar Thrifty’s board of directors continued to be focused on deal certainty and that a key element of the exclusivity period must be addressing the board of directors’ concerns with respect to deal certainty.
On February 3, 2010, Dollar Thrifty and Hertz signed an exclusivity agreement, in which Dollar Thrifty agreed not to solicit, discuss or authorize an acquisition transaction with any third party prior to March 17, 2010, subject to an early termination right on or after March 3, 2010 if, in Dollar Thrifty’s good-faith judgment, the discussions between the parties were unlikely to result in a definitive agreement. On February 3, 2010, trading in Dollar Thrifty common stock closed at $25.17.
During the week of February 8, 2010, Dollar Thrifty and Hertz began exchanging materials (including granting the other party access to an electronic data room) and conducting reciprocal due diligence investigations. On February 10, 2010, Mr. Thompson met in person in Chicago with Mr. Frissora and certain members of Hertz’s board of directors to discuss a potential transaction. On February 11, 2010, Dollar Thrifty management conducted a management presentation in Chicago for Hertz management, providing an overview of the Dollar Thrifty business and responding to due diligence questions posed by Hertz management. The closing price of Dollar Thrifty common stock on that date was $26.96.
On February 12, 2010, Cleary delivered a draft merger agreement to Debevoise. During the weeks of February 15 and February 22, 2010, Dollar Thrifty and Hertz continued their respective due diligence efforts. On February 24, 2010, Debevoise delivered a revised draft of the merger agreement to Cleary, reflecting Hertz’s comments. This draft contained an extensive list of closing conditions, including conditions relating to minimum cash amounts and minimum earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, of Dollar Thrifty, as well as, the procurement of third-party consents, and the absence of any regulatory challenge to the transaction.
On February 15 and February 24, 2010, Dollar Thrifty’s board of directors met to discuss the status of the potential transaction with Hertz.
On March 1 and 3, 2010, representatives of Debevoise and Cleary had telephonic discussions concerning the draft merger agreement provisions relating to the parties’ obligations to obtain regulatory approvals and the proposed closing conditions in Hertz’s revised draft of the merger agreement. On March 2, 2010, Debevoise communicated to Cleary that Hertz would be prepared to commit to divest (if required to obtain clearance under the HSR Act) business locations and business lines that produced, in the aggregate, less than $100-150 million in gross revenues and $10-15 million in EBITDA, in each case for calendar year 2009.
On March 3, 2010, in light of the issues raised by Hertz’s comments on the merger agreement relating to transaction certainty, Dollar Thrifty decided to terminate discussions with Hertz, and J.P. Morgan, at Mr. Thompson’s instruction, informed Barclays of that decision.
On March 5, 2010, Dollar Thrifty’s board of directors met and discussed the recent developments concerning the negotiation of the merger agreement. The board of directors directed Dollar Thrifty management to suspend Hertz’s due diligence access and not to engage in further discussions unless and until Hertz revised its positions in a manner more consistent with Dollar Thrifty’s objective of transaction certainty. On the same day, first Dollar Thrifty, and then Hertz, suspended their respective due diligence investigations and the other party’s access to its electronic data room. The closing price of Dollar Thrifty common stock on that date was $31.77.
On March 8 and March 11, 2010, Messrs. Thompson and Frissora held telephonic discussions in which Mr. Frissora responded to concerns raised by Mr. Thompson regarding provisions in the revised draft merger agreement related to transaction certainty, including the allocation of risk associated with procuring necessary regulatory approvals and also certain closing conditions sought by Hertz relating to Dollar Thrifty’s financial condition.
On March 12, 2010, Debevoise sent Cleary a further revised draft of the merger agreement, intended to reflect the March 8 and March 11 discussions between Messrs. Thompson and Frissora, including, among other things, the addition of a reverse termination fee payable by Hertz to Dollar Thrifty if certain regulatory approvals were not obtained prior to the merger agreement’s termination date and the conditions to the consummation of the proposed transaction were otherwise fulfilled, and the deletion of certain closing conditions relating to Dollar Thrifty’s financial condition that had been objected to by Mr. Thompson on behalf of Dollar Thrifty. The termination fee (payable by Dollar Thrifty under certain circumstances) and reverse termination fee (payable by Hertz under certain circumstances) proposed by Hertz were each in the amount of 4.5% of transaction equity value.
On March 16, 2010, Cleary sent Debevoise a proposal for a revised transaction structure designed to accommodate Dollar Thrifty’s desire that the transaction be treated as a tax-free reorganization while preserving Hertz’s desire that Dollar Thrifty’s existing medium term notes remain outstanding notwithstanding the proposed transaction. During this period, however, due diligence remained suspended, pending the outcome of a meeting of Dollar Thrifty’s board of directors to assess progress in addressing Dollar Thrifty’s concerns with respect to the terms of the proposed merger agreement.
On March 17, 2010, Cleary sent Debevoise a revised draft of the merger agreement and on March 19, 2010, representatives of Cleary and Debevoise held a conference call to discuss various provisions of the draft merger agreement as well as Cleary’s proposed structure. The discussion of the draft merger agreement addressed, among other things, the representations and warranties to be made by the parties, limitations on the parties’ conduct of business between signing of the merger agreement and closing of the proposed transaction, other covenants, including a provision requiring Dollar Thrifty to make a special cash dividend to its stockholders immediately prior to the merger, restrictions on Dollar Thrifty’s pursuing alternative business combinations, obligations relating to regulatory approvals, conditions to closing, and various provisions relating to termination and termination fees payable by Dollar Thrifty under certain circumstances (which Dollar Thrifty proposed to be equal to 3% of transaction equity value), reverse termination fees payable by Hertz under certain circumstances if Hertz failed to obtain certain regulatory approvals (which Dollar Thrifty proposed to be equal to 5% of transaction equity value) and expense reimbursement (which Hertz proposed to be $5 million for each party). On March 20, 2010, Debevoise sent Cleary a revised draft of the merger agreement intended to reflect the results of the March 19 discussions noting, among other things, that the issue of termination fees, reverse termination fees and expense reimbursement remained unresolved.
On March 21, 2010, senior management of Dollar Thrifty and Hertz held a conference call to discuss alternative transaction structures that were intended by Dollar Thrifty and its legal and financial advisors to allow the merger to be treated as a tax-free reorganization while not triggering a default under Dollar Thrifty’s medium term note agreements, as well as proposed merger agreement limitations on the conduct of Dollar Thrifty’s business between signing of the merger agreement and closing of the proposed transaction.
On March 22, 2010, representatives of Cleary communicated to representatives of Jones Day, Dollar Thrifty’s proposal that Hertz commit to divest business locations or business lines that produced aggregate gross revenues in an amount up to $400 million in 2009 if necessary to obtain antitrust regulatory approvals.
On March 25, 2010, Dollar Thrifty’s board of directors met to discuss the status of the discussions with Hertz. At the meeting, representatives of Cleary again reviewed with the board of directors their fiduciary duties in connection with a potential sale of Dollar Thrifty. Representatives of Cleary reported to the board of directors on the status of the merger agreement negotiations with Hertz, and described the alternative transaction structure earlier discussed with Debevoise. The members of the board of directors also discussed: the company’s long-term growth rate, the historical volatility of the company’s financial results, the company’s ability to retain its senior management on a long-term basis and the position and the long-term competitive challenges facing the industry and the company; Dollar Thrifty’s financial advisors’ analyses relating to the proposed merger with Hertz; and the status of discussions with respect to the proposed transaction. The board of directors also discussed Dollar Thrifty’s anticipated financial results for the first quarter of 2010, which were expected to be more favorable than those projected by Wall Street analysts. The board of directors considered whether to suspend further discussions with Hertz regarding transaction valuation until after the impact of the earnings announcement on the company’s stock price was known. In addition, the Dollar Thrifty board of directors again considered the possibility of contacting Avis. Members of the board of directors noted that: no determination had been made to sell Dollar Thrifty; given the extensive history of prior failed discussions with Hertz and the rapidly growing spread between the trading prices of the companies’ shares, there could be no assurance that the present discussions would result in any definitive merger agreement with Hertz; given its financial circumstances, Avis would likely require substantial financing and/or the approval of its shareholders in order to effect a transaction with Dollar Thrifty at a price competitive with the Hertz proposal, and such contingencies would present undesirable transaction risk for Dollar Thrifty and its shareholders; and the terms of the merger agreement then under discussion with Hertz would not preclude Avis from making a proposal after the signing of the agreement if it desired to do so. At the conclusion of the meeting, the board of directors authorized and directed Mr. Thompson to continue negotiations and due diligence with Hertz with a target date for the signing of the merger agreement to occur after the announcement of both companies’ earnings for the first quarter of 2010.
On March 26, 2010, Mr. Thompson reported to Mr. Frissora that Dollar Thrifty’s board of directors was satisfied with the progress that had been made on the proposed terms for a transaction and that, accordingly, it was prepared to reengage in the mutual due diligence needed to complete a transaction. Mr. Thompson also emphasized that transaction certainty remained Dollar Thrifty’s primary issue and that Dollar Thrifty was not interested in a transaction with Hertz that did not include a premium to the market price. Also on March 26, at the request of Hertz and Dollar Thrifty, the respective financial advisors of Dollar Thrifty and Hertz held a conference call to discuss financial considerations with respect to the proposed transaction, and, separately, representatives of Cleary and Debevoise held a conference call to discuss the draft merger agreement and transaction structure. The closing price of Dollar Thrifty common stock on that date was $33.90.
On April 4, 2010, senior management of Dollar Thrifty and Hertz held a conference call, which continued their discussion on operating covenants that would limit Dollar Thrifty’s conduct of business in the period between the signing of a merger agreement and closing of the proposed transaction. On April 8, Cleary delivered to Debevoise a revised draft of the operating covenants from the prior draft of the merger agreement, providing for such limitations. Also, on April 8, 2010, at the request of Hertz and Dollar Thrifty, Dollar Thrifty’s financial advisors held a conference call with Barclays to discuss financial terms of the potential transaction between Hertz and Dollar Thrifty. Mr. Thompson instructed Dollar Thrifty’s financial advisors to propose, among other things, a price of $44.96 per share of Dollar Thrifty common stock (a 25% premium to that day’s closing price for shares of Dollar Thrifty common stock) in a 50% cash / 50% Hertz common stock consideration mix, to be effected as a tax-free reorganization. The closing price of Dollar Thrifty common stock on April 8, 2010 was $35.97.
On April 9, 2010, Hertz suspended the due diligence process and on April 12, 2010, Hertz’s board of directors held a special telephonic meeting at which it rejected the oral proposal put forward by Dollar Thrifty’s investment bankers on April 8 and instructed Hertz management to cease negotiations with Dollar Thrifty. That same day, Mr. Frissora sent a letter to Mr. Thompson informing him of this determination, but inviting Mr. Thompson to contact him with ideas to restart a transaction process.
On April 12, 2010, Mr. Nelson of Avis contacted J.P. Morgan to inquire about whether Mr. Thompson would accept a call from him. Mr. Nelson did not specify the reason he wanted to call Mr. Thompson. Following such contact from Mr. Nelson, J.P. Morgan conveyed Mr. Nelson’s inquiry to Mr. Thompson and Mr. Capo. While he initially considered the possibility that Mr. Nelson requested the meeting for the purpose of discussing a potential bid for Dollar Thrifty, Mr. Thompson’s understanding regarding Avis’s interest and ability to effect such a transaction, the previously announced prospective changes in the senior management of Avis and the ambiguity surrounding the stated purpose of the meeting, as well as reports received by Mr. Thompson to the effect that Avis had made inquiries concerning his personal background, all led Mr. Thompson to conclude that the purpose of the meeting was of a personal nature, rather than to discuss a business combination transaction.
On April 14, 2010, representatives of J.P. Morgan proposed that Mr. Frissora and another member of Hertz’s board of directors meet in Chicago with Mr. Thompson and a member of Dollar Thrifty’s board of directors for the purpose of reconciling the outstanding issues between the companies. This meeting was scheduled for April 16, 2010.
On April 15, 2010, Hertz senior management held a conference call with several members of Hertz’s board of directors, at which management and representatives of Hertz’s legal and financial advisors summarized the open issues in the negotiations with Dollar Thrifty.
On April 16, 2010, Messrs. Thompson and Frissora, along with members of Hertz senior management, Thomas Capo, the then non-executive chairman of Dollar Thrifty’s board of directors, members of Dollar Thrifty senior management, and David Wasserman, a member of Hertz’s board of directors, together with representatives of Hertz’s and Dollar Thrifty’s respective financial advisors, met in Chicago to discuss the proposed transaction. Initially at this meeting, representatives of Dollar Thrifty, based on their prior consultation with Dollar Thrifty’s financial advisors and board of directors, informed Hertz and its representatives that Dollar Thrifty was only interested in a purchase price in excess of $40 per share of Dollar Thrifty common stock, with a 50% cash / 50% Hertz stock consideration mix in a tax-free reorganization structure. Hertz countered with an offer of $38 per share of Dollar Thrifty common stock and an 80% cash / 20% Hertz stock consideration mix. Dollar Thrifty then countered with an offer of $42 per share of Dollar Thrifty common stock and an 80% cash / 20% Hertz stock consideration mix, which Hertz was unwilling to offer. Hertz management advised the Dollar Thrifty representatives that Dollar Thrifty’s proposal was unacceptable to Hertz, and that Hertz was terminating its discussions with Dollar Thrifty. The closing price of Dollar Thrifty common stock on April 16, 2010 was $34.63. Dollar Thrifty instructed Dollar Thrifty’s financial advisors and Cleary to terminate all work in connection with the prospective transaction, and terminated Hertz’s access to Dollar Thrifty’s electronic data room.
Also on April 16, 2010, J.P. Morgan contacted Mr. Nelson of Avis to advise that Mr. Thompson would accept his call.
On April 19, 2010, Mr. Nelson invited Mr. Thompson to meet for dinner, stating that he was going to be visiting Tulsa to review Avis’s Tulsa operation center. Although Mr. Thompson did not know the purpose of Mr. Nelson’s invitation and continued to believe it was of a personal nature, he agreed to meet with Mr. Nelson and Robert Salerno, chief operating officer of Avis, on April 28, 2010. Mr. Thompson advised Mr. Capo shortly thereafter (and subsequently, the other members of the Dollar Thrifty board of directors) of Mr. Nelson’s invitation. After the announcement of the execution of the 2010 Merger Agreement, Mr. Thompson canceled this meeting based on his view that such a meeting with an industry competitor at that time would have been inappropriate.
On April 21, 2010, Mr. Frissora telephoned Mr. Thompson and proposed a revised final offer by Hertz, which Mr. Frissora had previously discussed with a member of Hertz’s board of directors and later that day communicated by e-mail to Hertz’s board of directors, to acquire Dollar Thrifty at a price of $40 per share, with an 80% cash / 20% Hertz stock consideration mix, which would make the merger ineligible for tax-free reorganization treatment. Mr. Frissora communicated that the offer was subject to Dollar Thrifty’s agreement to certain other terms, including a specified level of divestitures that Hertz would be required to accept in order to secure regulatory approval for the transaction, the termination date of the merger agreement, and the amount of the fees to be payable upon termination of the merger agreement under certain circumstances by Dollar Thrifty and Hertz, respectively. Mr. Frissora also stated that Hertz’s proposal was also contingent upon the parties’ execution of a definitive merger agreement no later than April 25, 2010 and public announcement of a transaction no later than the morning of April 26, 2010, on which date Hertz was scheduled to announce its financial results for the first quarter of 2010. Mr. Frissora subsequently confirmed Hertz’s offer by e-mail to Mr. Thompson. The closing price of Dollar Thrifty common stock on April 21, 2010 was $37.22.
On April 22, 2010, Dollar Thrifty’s board of directors met to consider the revised Hertz proposal. After discussion with Dollar Thrifty’s management, Dollar Thrifty’s financial advisors and Cleary, the board of directors concluded that, in its view, it was unlikely that Hertz would increase its offer of $40 per Dollar Thrifty share by more than a de minimis amount. In addition, although Dollar Thrifty board of directors had earlier considered suspending further discussions on transaction valuation until after the announcement of Dollar Thrifty’s and Hertz’s first quarter financial results, Hertz made clear that its then-current offer was contingent on the execution of a definitive transaction agreement prior to April 26, 2010, the day Hertz planned to announce its first quarter financial results (which had been previously shared with Dollar Thrifty) and prior to the date Dollar Thrifty had planned to announce its first quarter financial results (which had been previously shared with Hertz). Dollar Thrifty’s board of directors believed that the then-current proposal was Hertz’s best and final offer, and that Hertz would finally terminate discussions with Dollar Thrifty if the offer was not agreed to by Hertz’s stated deadline. Dollar Thrifty’s board of directors considered the possibility of accelerating the announcement of Dollar Thrifty’s own financial results to be contemporaneous with Hertz’s announcement, but concluded that such a step would not be practicable. Dollar Thrifty’s board of directors then directed Dollar Thrifty management to finalize a definitive merger agreement with Hertz substantially on the proposed terms.
After further negotiations, on April 22, 2010, Messrs. Frissora and Thompson agreed to recommend to their respective boards of directors a transaction between the companies at a price of $41 per share of Dollar Thrifty common stock in an 80% cash / 20% Hertz stock consideration mix and on the other terms proposed by Mr. Frissora on April 21. The proposed merger consideration of $41 per share of Dollar Thrifty common stock, together with the proposed resolution of the remaining issues raised in Mr. Frissora’s April 21 proposal (including termination and reverse termination fees in an amount equal to 3.5% of transaction value, plus $5 million in expense reimbursement and provisions on the treatment of required divestitures) were set out in a letter delivered by Dollar Thrifty to Hertz on April 22, 2010. After receipt of this letter, Hertz representatives, including Debevoise and Jones Day, and representatives of Cleary held conference calls to discuss issues not addressed by the communications between Messrs. Thompson and Frissora, and finalized the specified level of required divestitures, which was ultimately included in the merger agreement.
On April 23, 2010, members of Hertz senior management, members of Dollar Thrifty senior management and representatives of Debevoise and Cleary held a conference call to discuss the operating covenants that would limit the conduct of Dollar Thrifty’s business between signing of a merger agreement and the closing of the proposed transaction. Also on April 23, Cleary delivered to Debevoise a revised draft of the merger agreement. The closing price of Dollar Thrifty common stock on April 23, 2010 was $38.85.
Hertz, Dollar Thrifty and their respective representatives continued to discuss the terms of a proposed transaction from April 24 through April 25, 2010. The issues discussed included, among others, the circumstances and procedures under which the Dollar Thrifty board of directors could consider a competing transaction proposal, the requirement that immediately prior to the closing of the proposed transaction Dollar Thrifty pay a $200 million special cash dividend to its stockholders and, if the transaction closes prior to January 31, 2011, the obligation to repay its secured credit facility from cash on hand, and the identity of the Dollar Thrifty representative who would be appointed to the Hertz board of directors at closing of the proposed transaction. Based on these discussions, representatives of Debevoise and Cleary completed the negotiation of the terms of a definitive merger agreement on April 25, 2010.
In the afternoon of April 25, 2010, Dollar Thrifty’s board of directors held a special telephonic meeting to consider the terms of the proposed transaction. At the meeting, representatives of Cleary reviewed with the board of directors their fiduciary duties in connection with the proposed transaction and the key terms of the merger agreement. Dollar Thrifty’s management discussed Dollar Thrifty’s anticipated ability to pay the special dividend with the board of directors. Dollar Thrifty’s financial advisors made a presentation regarding their financial analyses of the transaction (related written materials having been provided in advance of the meeting to each member of the board), and delivered the oral opinions of their respective firms, which were subsequently confirmed by written opinions that, as of such date, and based upon and subject to the factors and assumptions set forth in the opinions, the total amount of cash and stock consideration, consisting of the merger consideration and special dividend per share amount, was fair, from a financial point of view, to Dollar Thrifty’s shareholders. Following discussion, Dollar Thrifty’s board of directors unanimously approved the proposed merger agreement and the transactions contemplated thereby, including the special dividend, recommended that Dollar Thrifty’s shareholders approve the merger agreement, and directed the company to enter into the merger agreement.
Also in the afternoon of April 25, 2010, Hertz’s board of directors held a special telephonic meeting to consider the terms of the proposed transaction. At the meeting, Mr. Frissora provided an overview of the proposed transaction and reviewed its strategic rationale. Barclays reviewed with Hertz’s board of directors the financial terms of the proposed merger and Debevoise summarized the terms of the draft merger agreement. Following discussion, Hertz’s board of directors unanimously approved the proposed merger and authorized Hertz to enter into the merger agreement.
On April 25, 2010, an Agreement and Plan of Merger (defined above as the 2010 Merger Agreement) was executed by Dollar Thrifty, Hertz, and HDTMS, Inc., a wholly owned subsidiary of Hertz. That same day Hertz and Dollar Thrifty issued a joint press release announcing the transaction.
On the morning of May 3, 2010, Avis Budget Group, Inc. (“Avis”) sent Dollar Thrifty a publicly available letter indicating interest in a potential transaction with Dollar Thrifty. On May 4, 2010, Mr. Thompson responded to Avis’s in a publicly available letter indicating, among other things, that Dollar Thrifty was prepared to consider a “substantially higher offer” from Avis.
On May 6, 2010, Avis executed the confidentiality agreement proposed by Dollar Thrifty, and on May 7, 2010, Avis and Dollar Thrifty commenced reciprocal due diligence.
On May 13, 2010, Avis announced that it had filed a notification under the HSR Act with the FTC and DOJ relating to the potential acquisition of Dollar Thrifty by Avis.
On May 14, 2010, Hertz and Dollar Thrifty each filed the requisite notification and report forms under the HSR Act with the FTC and the DOJ. On May 21, 2010, Hertz and Dollar Thrifty each filed the requisite Competition Act (Canada) notification forms with the Canadian Competition Commissioner under the Competition Act (Canada).
On June 9, 2010, the Dollar Thrifty board of directors held a board meeting. At the meeting, representatives of Cleary reviewed with the board of directors their fiduciary duties in connection with the pending acquisition of the company. The board and representatives of Cleary also discussed the status of the antitrust review of Hertz’s and Avis’s notification and report forms filed under the HSR Act for an acquisition of Dollar Thrifty, and various alternative scenarios in connection with potential actions on the part of Avis. Also at the meeting, Dollar Thrifty’s financial advisors discussed the state of the leveraged finance markets and Avis’s ability to procure the financing necessary to make a superior proposal under the terms of the 2010 Merger Agreement. They also discussed Hertz’s financial ability to match a superior offer by Avis.
On June 14, 2010, Hertz and Dollar Thrifty received a second request from the FTC. On June 15, 2010, Avis announced it had received a second request from the FTC.
In late June 2010, representatives of Avis contacted representatives of Dollar Thrifty to advise them that, although Avis had not yet made any proposal to acquire Dollar Thrifty, Avis remained interested in a transaction with Dollar Thrifty and expected to make an acquisition proposal.
As a result of a query by the SEC staff regarding the 20 business day broker search period required by Rule 14a-13 promulgated under the Exchange Act, on July 16, 2010, Dollar Thrifty’s board of directors rescheduled the special meeting of Dollar Thrifty stockholders with respect to the merger to occur on September 16, 2010 (from the previously scheduled date of August 18, 2010), and reset the record date for the special meeting to August 13, 2010 (from the previously scheduled date of July 16, 2010).
On July 27, 2010, Hertz won regulatory approval from the Canadian Competition Commissioner when the Canadian Competition Commissioner issued a no-action comfort letter to Hertz in respect of the merger.
On the afternoon of July 28, 2010, Dollar Thrifty received a letter from Mr. Nelson of Avis. In the letter, Avis offered to acquire Dollar Thrifty at $46.50 per share consisting of $39.25 in cash (which would include the proceeds of a pre-closing special dividend to be paid by Dollar Thrifty consistent with the Hertz proposal) and 0.6543 shares of Avis stock (then valued at $7.25). Avis issued a press release containing the text of such letter contemporaneously with its transmission to Dollar Thrifty. Later that day, Avis’s legal counsel, Kirkland & Ellis LLP, provided a proposed merger agreement to Cleary.
On July 28, 2010, Mr. Thompson sent Mr. Frissora an e-mail notifying him of the Avis bid.
On July 29, 2010, Avis provided to Dollar Thrifty a draft commitment letter for financing related to the offer, and filed its proposed form of merger agreement with the SEC.
On July 30, 2010, Dollar Thrifty’s board of directors met to discuss Avis’s offer. At the meeting, representatives of Cleary reviewed the fiduciary duties of the Dollar Thrifty board of directors as well as Dollar Thrifty’s contractual obligations under the 2010 Merger Agreement in connection with considering the Avis proposal. The Dollar Thrifty board of directors also received a presentation from Dollar Thrifty’s financial advisors of their preliminary financial analysis of the Avis offer. The Dollar Thrifty board discussed, among other things, the offering price, the degree of certainty relating to Avis’s financing for the offer and the antitrust risks attendant to the offer. In particular, the Dollar Thrifty board of directors considered the significance of the absence of a reverse termination fee in the Avis proposal. After consultation with Dollar Thrifty’s financial advisors and Cleary, Dollar Thrifty’s board of directors determined that further consideration was required, instructed the financial advisors and Cleary to seek additional information from Avis’s representatives, and agreed to reconvene on August 2, 2010.
On August 2, 2010, Dollar Thrifty’s board of directors met to continue discussion of Avis’s offer. Mr. Thompson and Dollar Thrifty’s advisors reported that, based on their respective conversations with Mr. Nelson and Avis’s representatives, Avis was firmly unwilling to include a reverse termination fee in its proposal. Representatives of Cleary provided a report with respect to the antitrust regulatory aspects of the Avis proposal, and Dollar Thrifty’s financial advisors made another presentation of their preliminary financial analysis of Avis’s offer. In consultation with Dollar Thrifty’s financial advisors and Cleary, Dollar Thrifty’s board of directors then discussed whether the Avis offer satisfied the criteria of a “superior proposal” under the 2010 Merger Agreement.
At the direction of Dollar Thrifty’s board of directors, on August 3, 2010, Mr. Thompson spoke with Mr. Nelson by telephone to advise him of the forthcoming transmission of a written response to Avis’s proposal. Later that day Dollar Thrifty sent a letter to Mr. Nelson (which was subsequently published in a press release), indicating that, among other things, Avis’s offer did not satisfy all of the prongs of the “Superior Proposal” requirement under the terms of the 2010 Merger Agreement.
On August 3, 2010, Mr. Thompson called Mr. Frissora to inform him of Dollar Thrifty’s response to Avis’s bid.
On August 5, 2010, the Dollar Thrifty board of directors met to receive a transaction update. Dollar Thrifty’s financial advisors made a presentation regarding the second quarter earnings performance and third quarter stock performance to date reported by each of Avis and Hertz. Mr. Thompson described his conversation with Mr. Nelson and the board discussed shareholder reactions to Dollar Thrifty’s response to the Avis proposal.
On September 2, 2010, Avis issued a press release announcing that it increased the cash portion of its offer from $39.25 to $40.75 per share.
On September 3, 2010, Mr. Frissora called Mr. Thompson to ask Dollar Thrifty to postpone its special meeting to permit Dollar Thrifty stockholders to make a more informed decision based upon potential developments in the FTC’s review of the transactions contemplated by the 2010 Merger Agreement and a potential alternate transaction with Avis. Mr. Thompson responded that while he would raise Mr. Frissora’s request with the Dollar Thrifty board of directors, he believed such a postponement was not necessary and that Hertz should consider an increase in the merger consideration to reflect what Mr. Thompson maintained was a material increase in the value of Dollar Thrifty’s business since the execution of the 2010 Merger Agreement and, thereby, to increase the likelihood of approval of the merger by Dollar Thrifty’s stockholders.
On September 7 and 8, 2010, Hertz’s board of directors met, together with its advisors, including representatives from Barclays, Deutsche Bank Securities Inc., BofA Merrill Lynch, D. F. King & Co., Inc. and Debevoise to discuss whether to propose to Dollar Thrifty an increase in the 2010 Merger Agreement consideration and, if so, on what terms. On September 8, the Hertz board of directors approved a $10.80 increase in the cash merger consideration to be paid per share of Dollar Thrifty common stock in the merger and authorized Hertz to propose the amendment to Dollar Thrifty.
On September 9, 2010, Mr. Thompson contacted Mr. Frissora by e-mail seeking confirmatory due diligence information, including confirmation of average analyst expectations/estimates for Hertz for 2010 and 2011. Mr. Frissora responded to Mr. Thompson that Hertz management believed Hertz was on track to meet average analyst expectations/estimates for Hertz for 2010 and 2011.
On September 10, 2010, Mr. Thompson called Mr. Frissora and informed him that the Dollar Thrifty board of directors had approved Hertz’s revised offer.
On September 10, 2010, Hertz, HDTMS, Inc. and Dollar Thrifty entered into an amendment to the previously executed 2010 Merger Agreement. The amendment provided for a $10.80 increase in the per share cash consideration to be paid by Hertz to Dollar Thrifty stockholders from $32.80 (less the special dividend per share amount) to $43.60 (less the special dividend per share amount). On September 13, 2010, Hertz and Dollar Thrifty issued a joint press release announcing the amendment and the postponement of the special meeting.
On September 23, 2010, Avis announced that it was increasing the cash portion of its offer from $40.75 to $45.79 per share (which would include the proceeds of a pre-closing special dividend to be paid by Dollar Thrifty consistent with its previous proposal).
On September 24, 2010, Hertz affirmed that its offer to acquire Dollar Thrifty at a purchase price equivalent to $50.25 (based on the then-current value of Hertz stock and including the special per share amount) was Hertz’s final offer.
On September 27, 2010, in a letter to Dollar Thrifty’s Chairman and President and Chief Executive Officer, Avis announced, among other things, that it had substantially completed its response to the FTC’s second request and, should the scheduled September 30, 2010 Dollar Thrifty stockholders meeting not be postponed and Dollar Thrifty’s stockholders not approve the 2010 Merger Agreement, Avis’s commitment to commence an exchange offer no later than 10 business days after such Dollar Thrifty stockholder meeting.
On September 29, 2010, Avis announced its commitment to enter into a merger agreement with Dollar Thrifty that would require Avis to pay a $20 million reverse termination fee and reiterated its commitment to commence an exchange offer 10 business days after the Dollar Thrifty stockholder meeting if the 2010 Merger Agreement was not approved by Dollar Thrifty stockholders. Avis reaffirmed those commitments on September 30, 2010.
On September 30, 2010, at a special meeting of Dollar Thrifty stockholders, a majority of the outstanding shares of Dollar Thrifty common stock did not vote in favor of the proposal to adopt the 2010 Merger Agreement. As a result, on October 1, 2010, Hertz terminated the 2010 Merger Agreement. Also, on October 1, 2010, Hertz withdrew its application under the HSR Act with the FTC and DOJ.
Hertz has not been in contact with the management of Dollar Thrifty or Dollar Thrifty’s board of directors since the termination of the 2010 Merger Agreement regarding the offer or an acquisition of Dollar Thrifty by Hertz.
On October 5, 2010, Avis and Dollar Thrifty announced an agreement to cooperate on obtaining antitrust clearance for Avis’s proposed acquisition of Dollar Thrifty and that Avis would not be commencing an exchange offer.
On January 11, 2011, Avis and Dollar Thrifty issued a joint press release announcing that both Avis and Dollar Thrifty notified the FTC of their intention to certify substantial compliance with their second requests on a timetable that would require an official decision from the FTC by the end of March or early April.
On February 17, 2011, Avis announced that it had certified substantial compliance with the FTC’s second request relating to Avis’s proposed acquisition of Dollar Thrifty. On February 24, 2011, Dollar Thrifty announced that it had certified substantial compliance with the FTC’s second request relating to Avis’s proposed acquisition of Dollar Thrifty.
In February 2011, Hertz retained Cravath, Swaine & Moore LLP, as legal counsel, and Lazard, Frères & Co. LLC, as a financial advisor.
On May 8, 2011, Mr. Frissora informed Mr. Thompson over the phone that Hertz intended to announce a cash/stock exchange offer for Dollar Thrifty common stock the next day. Mr. Frissora discussed the merits of Hertz’s proposal, including the compelling value and closing certainty being offered. Mr. Frissora also explained to Mr. Thompson that Hertz is seeking a friendly and cooperative transaction.
39
On May 9, 2011, Mr. Frissora sent a letter to Mr. Thompson, the text of which follows:
Dear Scott:
As we discussed yesterday, Hertz is moving forward with an exchange offer for all outstanding shares of Dollar Thrifty Automotive Group, Inc. Hertz is offering Dollar Thrifty shareholders $72.00 per share (based on Hertz’s closing stock price on May 6, 2011), consisting of $57.60 in cash and 0.8546 shares of Hertz. We believe that Hertz’s offer represents a compelling opportunity for your shareholders to realize superior value in the near term with a very high degree of closing certainty.
Hertz is looking forward to proceeding on a consensual basis with the support of the Dollar Thrifty Board of Directors and management team. Our exchange offer is intended to provide Dollar Thrifty’s shareholders with a firm offer on an accelerated timetable in order to position Hertz and Dollar Thrifty to close a deal and deliver value to Dollar Thrifty’s shareholders as soon as possible.
We believe we have made a superior offer that reflects Dollar Thrifty’s improved recent performance and outlook for 2011. Specifically, our offer provides:
|
|
●
|
a 26% premium and 18% premium to Dollar Thrifty’s 90-day and 60-day average share price, respectively;
|
|
|
●
|
a 7.6x multiple of Dollar Thrifty’s LTM EBITDA for the period ended March 31, 2011; and
|
|
|
●
|
a 24% premium to the value of the entirely hypothetical price announced by Avis Budget Group, Inc. over seven months ago of $45.79 in cash and 0.6543 shares of Avis stock,
|
based on the closing stock prices for Hertz and Avis on May 6, 2011. These are substantial premiums, especially after taking into account the significant takeover speculation premium already included in Dollar Thrifty’s current stock price.
Our offer delivers a high degree of closing certainty. We are engaged in discussions with the Federal Trade Commission and have started a process for the divestiture of our Advantage brand. We are highly confident that we will obtain FTC clearance for the transaction and are committed to a fast path forward. In contrast, Dollar Thrifty’s shareholders do not have any offer from Avis, and it has become clear that Avis is either unwilling or unable to close on an offer even if it made one because of serious antitrust obstacles.
Our offer is not subject to any financing condition or contingency.
This transaction is the highest priority for Hertz and has the unanimous support of our Board of Directors and management team. I am available to speak with you at any time, and I encourage you to have your financial and legal advisors meet with Mark McMaster at Lazard and Scott Barshay at Cravath, two of our principal advisors. We look forward to working with you and your team to advance the best interests of our respective shareholders, employees and customers.
Sincerely,
Mark P. Fissora
Chairman of the Board and Chief Executive Officer
Hertz Global Holdings, Inc.
The advantages of a Hertz-Dollar Thrifty combination are compelling, and we believe a combination of these two companies creates superior value for the Dollar Thrifty and Hertz stockholders. In particular, we believe that the offer provides compelling value to Dollar Thrifty stockholders because, among other reasons:
|
|
●
|
Premium Offered to Dollar Thrifty Stockholders—The offer represents a 26% premium to Dollar Thrifty’s 90-day average closing share price, and a 18% premium to Dollar Thrifty’s 60-day average closing share price (measured from May 6, 2011 and based on the closing stock price for Hertz on that date). These are substantial premiums, especially after taking into account the large takeover speculation premium that was already included in Dollar Thrifty’s stock price prior to our announcement of the offer.
|
|
|
●
|
Limited Conditions and Ready to Close Quickly—Our offer has limited conditions and we are ready to close a transaction with Dollar Thrifty as quickly as possible. Hertz is working to secure antitrust clearance on an accelerated basis. Our offer is also not subject to the approval of Hertz’s stockholders. We announced the offer to facilitate the acquisition of Dollar Thrifty as promptly as practicable.
|
We also believe the combination of Hertz and Dollar Thrifty is a compelling combination with a number of strategic benefits, including the following:
|
|
●
|
Global Leader—The combination of Hertz and Dollar Thrifty would create a global, multi-brand rental car leader able to offer customers a full range of rental options through its market leading brands. The combined company would have leadership positions in many key car rental markets around the world, with significant growth opportunities based on the combined brand portfolio and its unparalleled value and premium offerings.
|
|
|
●
|
Growth Opportunities—A combination of Hertz and Dollar Thrifty is expected to accelerate revenue and earnings growth for the combined company over time. In particular, the acquisition of Dollar Thrifty would help accelerate Hertz’s leisure rental strategy in Europe and other markets. The combined company should also be able to compete even more effectively and efficiently against other multi-brand car rental companies while expanding the value-focused leisure brands.
|
|
|
●
|
Comprehensive Brand Positioning—Hertz believes that a combination of Hertz and Dollar Thrifty will enable Hertz to achieve growth in the leisure travel and the value-priced rental vehicle segments with distinct value/leisure brands while also maintaining the focus of the Hertz brand as the preeminent premium car rental brand in the United States and abroad.
|
|
|
●
|
Operational Benefits—Hertz believes there is potential for meaningful savings through improved fleet procurement and management as a result of consolidation of Hertz’s and Dollar Thrifty’s fleets and integration of information technology and other functions.
|
|
|
●
|
Profitability—Hertz anticipates that the offer and second-step merger will be accretive to its annual earnings per share of common stock in the first full year following consummation of the transactions.
|
|
|
●
|
Enhanced Capital Markets Presence—The combined company will be the largest publicly traded rental car company in the world with increased trading liquidity on the NYSE. We believe the combined company will have an enhanced capital markets presence and greater long-term financial stability and access to financial resources than any other publicly traded rental car company in the world.
|
|
|
●
|
Attractive Diversification—The combined company and its stockholders will benefit from increased diversification across the premium and value segments of the rental car industry. The addition of Dollar Thrifty to Hertz’s existing brand portfolio would complement Hertz’s existing position in the car rental market by adding a value brand that is associated with the leisure travel and value-priced rental vehicle segments.
|
Hertz realizes that there can be no assurance about future results, including results considered or expected as described in the factors listed above, such as assumptions regarding potential synergies or other benefits to be realized following the offer and second-step merger. Hertz’s reasons for the offer and all other information in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements.”
Purchaser is offering to exchange for each outstanding share of Dollar Thrifty common stock that is validly tendered and not properly withdrawn prior to the expiration date (i) $57.60 in cash, without interest and less any required withholding taxes, and (ii) 0.8546 shares of Hertz common stock, upon the terms and subject to the conditions contained in this prospectus/offer to exchange and the accompanying letter of transmittal. In addition, you will receive cash instead of any fractional shares of Hertz common stock to which you may otherwise be entitled.
The term “expiration date” means 12:00 midnight, New York City time, on July 8, 2011, unless Purchaser extends the period of time for which the offer is open, in which case the term “expiration date” means the latest time and date on which the offer, as so extended, expires.