Hertz IPO: Things That Make You Go 'Hmm'

Jul.17.06 | About: Hertz Global (HTZ)

The IPO plan announced by the various private equity buyers of car rental company Hertz is one of the those things that make you go hmmm. While it's nice to see the boys and girls able to flip something the size of Hertz in a scant seven months(!), it's still a little surprising.

Some random reasons:

* Clayton Dubilier & Rice, one of the Hertz private equity backers, doesn't generally do the flip thing
* What does it say about Hertz, gas prices, and the outlook for the car rental market that the private equity kids newly want out this quickly? In part it's because car rental is highly inversely levered to car prices and gas prices.
* While the deal was advertised as a $15-billion, there was "only" (I use that word advisedly in the billion-dollar context) $2-billion in equity put up, $1-billion of which has already been dividended back out of Hertz to CD&R, et al. In other words, a good chunk of the risk is already out of the deal, so why the IPO hurry?

It seems clear this should be read as a savvy and strongly negative insider statement about the car rental business. Buying (in the IPO) when so many smart people are selling is rarely a good idea.