Avis raises offer for Dollar Thrifty

NEW YORK/BANGALORE (Reuters) - Car rental company Avis Budget Group Inc CAR.N raised its bid for Dollar Thrifty Automotive Group (DTG.N) 3 percent to $1.36 billion, as it looks to wrest the company from rival Hertz Global Holdings. (HTZ.N)

Avis raised the cash portion of its bid by $1.50 to $40.75 a share on Thursday. The stock portion of the deal remains unchanged at 0.6543 Avis share for each Dollar share, bringing the total offer up to $47.40 as of Thursday afternoon.

The Avis bid is now 22 percent higher than the deal Dollar Thrifty agreed to with Hertz in April. Dollar Thrifty rebuffed Avis' previous bid last month, even though it was the higher offer, on worries that Avis would not be able to close the deal for antitrust reasons.

The company also said then that Avis' unwillingness to offer a fee to Dollar Thrifty if Avis' proposed deal is not completed was problematic.

Nevertheless, Avis refused to include the reverse termination fee in Thursday's increased bid for the budget brand, arguing that the possible payment has nothing to do with certainty of closing.

Avis also said that it will further increase its offer if Hertz and Dollar Thrifty reduce the breakup fees they agreed to under their deal.

Low-cost brands like Dollar Thrifty -- one of the few major car rental brands to post a profit in 2009 -- have become increasingly important in the car rental industry as consumers try to save money in tight economic times.

The bid is "going to make for an interesting review by the Dollar Thrifty board," said Fred Lowrance, an analyst at Avondale Partners. "They have already asked for reverse termination fee, but they didn't get that. At the same time, their shareholders are getting more and more vocal about wanting the best price," he said.

Hertz's offer is currently worth $38.89 a share, or about $1.11 billion.

Both offers are below Dollar Thrifty shares, which closed up 1.2 percent, or 56 cents, at $48.05 on the New York Stock Exchange on Thursday morning. Avis shares closed up 4.3 percent at $10.17, while Hertz shares were up 4.2 percent at $9.47.

Shareholders are set to vote on the Hertz bid on September 16. Avondale's Lowrance said that it is "99 plus percent probable that the current Hertz bid gets rejected by shareholders."

Earlier this week, Hertz raised doubts about Avis' ability to get a deal passed by antitrust regulators.

Avis called Hertz's antitrust allegations scare tactics.

"Both deals raise complex and similar antitrust issues and face comparable divestiture analyses," Avis said in its statement, noting that both companies currently compete with Dollar Thrifty.

Hertz and Avis already have begun the process of obtaining antitrust approval. But Hertz is thought to have a clearer path because it mostly focuses on more expensive segments of the car rental market. Avis already has a budget brand that competes with Dollar Thrifty.

Dollar Thrifty shares have risen more than 23 percent since Hertz's offer in April.

(Editing by Maju Samuel, Ilaina Jonas and Carol Bishopric)