Detailed and interesting commentary by The Deal Professor, Steven M. Davidoff, recently appeared in The New York Times’ DealBook section on Mergers & Acquisitions regarding the bidding war for Dollar Thrifty, which has been discussed in previous posts.
Davidoff breaks down the stakes in the competition between New Jersey-based companies Avis Budget Group and Hertz Global Holdings over Dollar Thrifty Automotive Group. Late last month, Avis’s chief executive sent an offer letter to Dollar Thrifty, saying Avis was offering a “superior proposal” for a merger with Dollar Thrifty. Davidoff looks at the language of the offer letter and outlines the main points of Avis’ proposal, how it differs from Hertz’s proposal (from last April), and what are the expected next steps in the competition for a Dollar Thrifty merger deal.
The most interesting aspect of Avis’s offer, according to Davidoff, is that Avis’s proposal does not include matching rights or break-up fees, and says it increases “the commitment to secure antitrust approvals.” Davidoff explains that Avis is attempting to push Hertz into eliminating matching rights and break-up fees if it comes back with a counter-bid.
Davidoff says that the next steps will be for the Dollar Thrifty Board to determine whether the Avis proposal is actually a “superior proposal.” If it decides that it is, the Dollar Thrifty Board must then provide two business days’ notice to Hertz before it can terminate the Hertz agreement and go with the Avis proposal. During those two days, Hertz’s matching rights allow that it must be given the chance to outbid Avis.
If Hertz does not make a superior proposal in that time, Dollar Thrifty would pay the termination fee and expenses total of $49 million to Hertz and accept the Avis proposal. Avis’s strategy in the merger competition is to eliminate the matching rights and termination fees in their proposal in the hope that Hertz will have to eliminate these conditions in any counter-bid in order to make a superior proposal. Avis is trying to gain a foothold in the competition in this way. It is yet to be seen how Hertz will respond.
Avis Goes to War for Dollar Thrifty (DealBook, The New York Times)