Schroders drives a good deal

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The Independent Online
Schroders Investment Management boosted its stake in EuroDollar Holdings to a strategic 20 per cent earlier this year before selling the entire holding to agreed bidder Republic Industries of the US last week.

Republic now controls nearly 43 per cent of the British car rental company. In launching its 190p a share offer last week, Republic obtained acceptances on the 13 per cent of EuroDollar owned by its management. These could be withdrawn if there were a higher offer.

But the company that is number two to Hertz in the US then picked up a further 29 per cent stake including the Schroders holding and equal 3.6 per cent stakes owned by Mercury Asset Management and Gartmore. Ordinary shareholders will have to wait a little longer to receive the 190p offer price.

"We couldn't discount the fact that somebody else might surface as a predator," said Geoff Corbett, head of Republic's European car rental business, explaining the decision to buy the extra 29 per cent. Any potential rival is now unlikely to emerge.

Schroders' clients were not the only ones to do well out of the agreed pounds 95m bid. In a move that tested client loyalty, Merrill Lynch acted for Republic in the deal even though it is broker to major rival Avis Europe, which it helped float on the London Stock Exchange only four months ago.

By adding EuroDollar to its existing Alamo car rental business, Republic will leapfrog Avis Europe into top position in the UK car rental business.

Alun Cathcart, chairman and chief executive of Avis Europe, contacted Merrill after the deal was announced. "I was assured that the EuroDollar deal was handled by a US team separate from the team in London that looks after Avis Europe," he said. "Merrill has said that now the deal is finished it is not going to act for Republic in Europe, so I'm quite relaxed and have no plans to change brokers."

Schroders is also adviser to EuroDollar and handled its public offer in July 1994, when shares in the car rental group opened at 225p. The shares have languished most of the time since then, falling to as little as 67p in late 1995, halfway through a trading year when a collapse in used car prices hit EuroDollar's profits. Car rental companies are heavily dependent on the prices at which they can dispose of their used rental fleets.

Schroders Investment Management increased its EuroDollar stake from 13 per cent to 20 per cent between January and April this year when the shares traded between 107p and 143p. The shares drifted lower to just 118.5p before the 190p a share deal was announced. Schroders sold the entire 9.6 million shareholding for just over pounds 19m.

Republic, run by Florida billionaire Wayne Huizenga, looks likely to end EuroDollar's existing relationship with Dollar, the American car rental company owned by Chrysler.

"We will look at the relationship over the next few months," said Mr Corbett. Asked whether a name change was likely, he said no decision on branding had been made. Republic owns five US car rental companies and has also moved into selling used and new cars.