UPDATE 3-Avis Budget says may bid higher for Dollar Thrifty

* Says interested in making substantially higher offer

* Says confident about antitrust timetable

* Dollar Thrifty shares rise 15 percent.
(Adds details, analyst comments, updates share movement)

By Bijoy Anandoth Koyitty

BANGALORE, May 3 (BestGrowthStock) – Car rental company Avis Budget
Group Inc (CAR.N: ) said it was interested in making a
“substantially higher” offer than Hertz Global’s (HTZ.N: ) $1.2
billion bid to acquire Dollar Thrifty (DTG.N: ), setting the
stage for a potential bidding war.

Shares of Dollar Thrifty, which have been trading above
Hertz’s April 26 offer of $41 a share, jumped 15 percent to
$50.41 in afternoon trade on the New York Stock Exchange.

In a letter to the board of Dollar Thrifty, Avis Budget
Chief Executive Ronald Nelson said, “We would like to make a
substantially higher offer to acquire Dollar Thrifty,
especially in light of your recent performance and the
potential synergies.”

Avis Budget said Citigroup is acting as financial adviser
and Kirkland & Ellis LLP is acting as legal counsel to the
company.

The company, however, did not make any offer on Monday and
was not immediately available for further comment. Dollar
Thrifty was also was not available for comment.

In the letter, Nelson said Hertz offered “virtually no
premium” to Dollar Thrifty’s shareholders, and added that Hertz
was funding only about $34 a share in the deal.

Under the agreement, Dollar Thrifty will pay its
shareholders a special cash dividend of $6.88 per share before
the closing of the deal.

Hertz’s bid represented a premium of 5.5 percent to Dollar
Thrifty’s closing price before the offer. With Monday’s share
price gain, the market values Dollar Thrifty at $1.43 billion.

CEO Nelson also said the terms of the Hertz-Dollar merger
agreement had an “unusually high break-up fee” to deter
competing bids.

Upon termination of the merger agreement, either Dollar or
Hertz might be required to pay the other party a termination
fee of about $50 million, a regulatory filing by Dollar Thrifty
on April 29 showed. This is nearly 5 percent of the total deal
value.

“From a legal and regulatory standpoint, Hertz-Dollar
Thrifty transaction was about to take as much 6 to 12 months,”
Neil Abrams of Abrams Consulting Group said.

“They were hoping to close it by the end of the year. What
this (Avis’ bid) can potentially do is delay the due processing
of the Hertz-Dollar deal.”

FIGHT FOR NUMBER TWO

If Hertz completes the deal, it will become the
second-biggest U.S. car rental company, replacing Avis Budget.
[ID:nSGE63P03V]

Privately held Enterprise Rent-A-Car dominates the market
with a share of 53 percent.

The takeover overtures flag the beginning of a
consolidation in the car rental industry, which is starting to
recover from a downturn in the economy and the automobile
industry in particular.

Avis Budget, which was set up in 1946 in Detroit as the
first car rental operation located at an airport, has a
considerable presence in the leisure market that Hertz is
targeting with the Dollar Thrifty acquisition.

At the time it announced the deal, Hertz said the agreement
required it to divest certain units if the U.S. Federal Trade
Commission determined that the deal would produce an
unacceptable concentration in the market.

In his letter to the Dollar Thrifty board, Avis Budget CEO
Nelson said, “We are confident that the antitrust analysis and
clearance timetable for an Avis/Dollar Thrifty transaction are
comparable to those associated with a Hertz/Dollar Thrifty
transaction.”

Analyst Abrams said, “Avis is high-end-travel oriented, and
Budget is more value conscious. So you will have Budget, Dollar
and Thrifty — three brands focused on the lower price leisure
customer, and that is something the regulatory authorities
would be looking at.”

The CEO also said Avis Budget had expressed its interest in
a deal with Dollar Thrifty on several occasions in the past,
but the company never engaged it in any discussion.

Hertz had earlier said its deal with Dollar Thrifty had
been in the works since November 2009. The company was not
immediately available for comment.

Avis Budget shares were down 4 percent at $14.45 in
afternoon trade on the New York Stock Exchange. Shares of Hertz
were down 6 percent at $13.66.

Stock Today

(Reporting by Bijoy Koyitty and Fareha Khan in Bangalore;
Editing by Saumyadeb Chakrabarty)

UPDATE 3-Avis Budget says may bid higher for Dollar Thrifty