Hertz float may raise $600m

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The Independent Online
Ford yesterday announced plans to float Hertz, the world's biggest car rental company, in a deal which is expected to value the business at up to $3bn.

The offering of up to 20 per cent of Hertz could raise as much as $600m for Ford and will mark the end of the US car giant's ownership of all of the business.

Ford made its first investment in the company in 1987 and acquired full control three years ago. But in January Ford said it was reviewing its strategic options for Hertz, including a partial sale.

The announcement compounds a period of remarkable turbulence in the US car rental sector, which has seen a string of transactions involving four of the top players. In January Ford sold its other rental holding, Budget, to Team Rental of Florida for $350m.

Ford refused to comment yesterday on whether it would consider disposing of the remainder of Hertz at a later date. The initial public offering (IPO), which will be handled for Ford by JP Morgan, will involve the issuing of new shares of Hertz common stock and will represent just under 20 per cent of the company.

Regardless of Ford's long-term strategy, the immediate hope is for a boost to Hertz shares. Last year, Ford sold off a similar slice of its Associates First Capital Corp also in a public offering, in return for which it saw a jump in the unit's share price from $29 to over $40.

"Investor interest in the rental car industry has increased dramatically," Ford's vice-chairman, Ed Hagenlocker, said yesterday. "We believe that it is now in the best interest of our shareholders to consider an initial public offering of Hertz."

It will be some weeks before the offer will be priced. The handling of the IPO represents a victory for JP Morgan, which snatched the business from Ford's traditional Wall Street bank, Goldman Sachs.

The other recent rental transactions have included the sale of the US Avis fleet to Team Rental of Florida in a deal last year. Meanwhile, the rapidly expanding Republic Industries, led by Wayne Huizenga, has recently purchased both the Alamo and National Car Rental operations.

The shake-up in ownerships is expected to trigger a fresh attempt by the industry to raise rental prices. Renting a car remains one of the more remarkable bargains for travellers in America, surpassed only by the price of a burger on the road.