Dollar Thrifty Automotive Group, a unit of DaimlerChrysler, and Vanguard Car Rental, which owns Alamo and National, are in talks to merge in a deal that could be worth over $3 billion. If completed, the company would be the third-largest car rental operator in the country behind Enterprise and Hertz. The negotiations are at a delicate stage, and even if an agreement is reached, it will be subject to federal antitrust scrutiny. The transaction would likely be a reverse takeover with Vanguard emerging as the controlling shareholder. It is also expected to result in higher rental prices for consumers. U.S. auto manufacturers have been providing fewer discounted cars to rental companies in order to focus more effectively on retail customers. Rental-car company margins have been flat, and a merger would provide welcome savings. In December 2005, a private equity consortium bought Hertz from Ford Motor, and in November of last year, Hertz went public. Avis Budget Group was spun off not long ago when the Cendant Corporation was broken up.
Sources: New York Times, Reuters
Commentary: The Long Case for Avis Budget • Four Candidates For The AutoRetailStocks Index • Is Car Rental Company Avis Headed the IPO Route?
Stocks/ETFs to watch: Dollar Thrifty Automotive Group Inc. (DTG), DaimlerChrysler (DCX), Hertz Global Holdings, Inc. (HTZ), Avis Budget Group, Inc. (CAR). ETFs: Rydex S&P Midcap 400 Pure Value (RFV)
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