* Avis offers $46.50 a share for Dollar Thrifty
* Total deal value of $1.33 billion
* Offer still below Dollar’s last closing price (Adds analyst comment, details about antitrust, background)
By Michael Erman and A. Ananthalakshmi
NEW YORK/BANGALORE, July 28 (Reuters) - Car rental company Avis Budget Group Inc CAR.N offered about $1.33 billion for Dollar Thrifty Automotive Group Inc DTG.N, topping Hertz Global Holdings’ (HTZ.N) offer as the two rivals spar to pick up the budget brand.
Still, Avis’ $46.50-a-share bid fell about $2 short of Dollar Thrifty’s closing stock price on Wednesday. Thrifty’s shares fell in extended trading.
Avis said its bid provides a premium of about 17 percent to the value of the Hertz offer, which is worth $39.86 a share.
“We are prepared to enter into a merger agreement that contains substantially the same terms as the Hertz merger agreement, but which includes removing the matching rights, eliminating the break-up fees, and increasing the commitment to secure antitrust approvals,” Avis said in a letter to Dollar Thrifty management.
Under the terms of its bid, Avis said Dollar Thrifty shareholders would receive $39.25 in cash and 0.6543 in stock for each share of Dollar. The cash portion of Avis’ bid includes a $6.88 special dividend that Dollar Thrifty would pay to its shareholders, as does the Hertz bid.
Avis, which amended its credit facility earlier this week for the bid, said the cash portion of its offer will be funded through a combination of available cash and fully committed financing.
In the current cost conscious environment, budget brands like Dollar Thrifty -- one of the few major car rental brands to post a profit in 2009 -- are increasingly important.
Hertz agreed to buy Dollar Thrifty in April, but Avis said soon after that it planned to make a better offer. Avis also criticized some of the terms of the Hertz deal, including Hertz’s right to match competing bids.
“There was speculation that it (Avis’ offer) would be higher than that,” said Neil Abrams, an analyst with Abrams Consulting Group. “But obviously it’s a more than 10 percent premium over Hertz’s offer, which is something that the shareholders have to think about and certainly challenge the management of Dollar Thrifty about.”
Whether or not either company can receive antitrust approval will also be key in determining who will walk away with Dollar Thrifty.
Both bids could draw close scrutiny from authorities as the consolidation in the rental car business has been rapid. [ID:nSGE63T0J6]
But Hertz is thought to have a clearer path to approval because it mostly focuses on more expensive segments of the car rental market. Avis already has a budget brand that competes with Dollar Thrifty.
Hertz and Avis have already begun the process of getting antitrust approval and have both received “second requests” from the regulator.
Privately held Enterprise Rent-A-Car has the largest piece of the U.S. car rental space, with a market share of 31 percent. A Dollar Thrifty buyout could lead to a scenario where just three companies -- Enterprise, Avis and Hertz -- control almost all of the car rental market.
Hertz has agreed to divest its Advantage brand and up to $175 million worth of revenue-generating business lines or locations to get antitrust clearance.
If it ends up with Dollar Thrifty, Avis would have four brands and the biggest share in the budget rental market.
Dollar Thrifty shares closed at $48.68 on the New York Stock Exchange on Wednesday, but fell to $48 in after market trade. They have risen 25 percent since Hertz’s offer in April.
Dollar Thrifty is being advised by Citigroup and Morgan Stanley. (Editing by Savio D‘Souza, Carol Bishopric and Richard Chang)