Hertz IPO Critical For Avis and Budget, Owned by Cendant

Jul.14.06 | About: Cendant Corp. (CD)

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

IPOS: Hertz's Owners Take Final Steps To Launch IPO

  • Summary: Just six and a half months after the leveraged buyout of Hertz by private-equity funds Carlyle Group, Clayton Dubilier & Rice Inc., and Merrill Lynch Global Private Equity, the company is preparing to file for an IPO. The private equity funds acquired Hertz from Ford for $2.3 bilion and the assumption of $13 billion in debt, and then paid themselves a $1 billion special dividend by issuing additional debt. Hertz' revenue increased 8.9% in Q1 year over year, benefitting from a strong economy and expansion into the "off-airport" market currently dominated by Enterprise Rent A Car Co. However, costs could rise as GM and Ford push up fleet prices on their cars to limit the impact on their cars' resale values.
  • Comment on related stocks/ETFs: Before you buy this IPO, read this discussion of increased debt leverage for companies like Hertz. The success of the Hertz IPO is important for Cendant (CD), which plans to spin off its Budget and Avis businesses later this year.