Hertz Global Holdings Inc. (HTZ:US) won final approval from the U.S. Federal Trade Commission for its $2.3 billion acquisition of Dollar Thrifty Automotive Group Inc., ending an eight-month compliance review of the deal.
Today’s announcement by the FTC seals the transaction, which the agency allowed to proceed provisionally on the condition that Hertz sell its Advantage brand and 29 other rental locations to create a competitor to the three remaining market leaders.
The FTC said in a statement that it made slight changes to the final agreement. They required the divestiture of the Dollar Thrifty counter, instead of the Advantage desk, at Ronald Reagan Washington National Airport. The order includes changes in the dates by which Hertz must transfer some locations to Advantage’s buyer, Macquarie Group Ltd.’s private-equity arm.
Analysts and rental-car executives have said consolidation in the industry is giving unprecedented pricing power to its market leaders, first-ranked, closely held Enterprise Holdings Inc., No. 2 Hertz and Avis Budget Group Inc. (CAR:US)
Hertz rose 2.3 percent to $26.85 at 12:46 p.m. in New York trading. The stock has more than doubled in the past 12 months. Avis was little changed at $32.42.
Normally, the FTC would have approved the consent decree in December following a 30-day comment period. The agency continued to investigate how Macquarie, which bought Advantage in a joint venture with Franchise Services of North America Inc. (FSN), was running the business, people familiar with the matter have said.
The FTC commissioners approved the transaction unanimously, with Commissioner Josh Wright abstaining.
“We are pleased that the FTC has officially concluded its review of the Dollar Thrifty transaction,” Mark Frissora, chairman and chief executive officer of Park Ridge, New Jersey-based Hertz, said in a statement. “Throughout this process we have worked closely with the agency, and the result has been a transaction that we believe will benefit our customers and shareholders for years to come.”
The FTC ordered Hertz to divest locations beyond the Advantage business to protect consumers, citing the $11 billion spent to rent 50 million vehicles at U.S. airports each year. Without the divestitures, the merger would have hurt competition at 72 airports around the U.S., the FTC said when it initially approved the transaction on Nov. 15.
Under terms of the consent decree, the commissioners could have rescinded the sale of Advantage to Macquarie and ordered the assets resold to another approved buyer.
Richard Branson’s Virgin Group Ltd., the travel and entertainment conglomerate, sent a letter June 7 to the FTC expressing its interest in the Advantage assets, which could have represented a way to gain quick access to the largest airports in the U.S., said Fred Lowrance, senior research analyst with Avondale Partners LLC in Nashville, Tennessee. Ordinarily, a company would have to bid for each airport counter as it became available.
The FTC’s investigation had focused on whether Macquarie was following through on its commitments to expand and strengthen Advantage after the Dec. 7 ouster of Sanford Miller, an industry veteran who was hired to run it, two people familiar with the matter said in April. Macquarie had said in an e-mail to Miller last July that it didn’t have car-rental experience.
Since November, the three big rental companies, which dominate the airport car-rental market, have raised prices at a rate not seen since the recession.
The rates charged by the eight brands owned by the remaining three major companies for an intermediate car at the airport in Boston rose 22 percent in May, according to Rate-Highway Inc., an Irvine, California-based company that tracks rental car pricing. That follows a 20 percent gain, on average, for April, from April 2012.
At the Los Angeles airport, prices rose, on average, 17 percent in May and 14 percent in April. For Miami, rates soared 44 percent in May, on average, and 17 percent in April, according to Rate-Highway.
Avis, which boosted prices twice in June, said it has “continued to aggressively implement pricing increases in North America.” In the first quarter, Avis raised prices six times and attributed the increases in part to Hertz’s deal for Dollar Thrifty.
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