July 29 (Bloomberg) -- Avis Budget Group Inc.'s $1.33 billion offer for Dollar Thrifty Automotive Group Inc., which topped Hertz Global Holdings Inc.'s agreement to buy the rental- car company, may signal a bidding war is under way.
The $46.50-a-share offer includes $39.25 in cash and 0.6543 of an Avis share for each Dollar Thrifty share, Parsippany, New Jersey-based Avis said yesterday in a statement. The proposal is 4.5 percent less than Dollar Thrifty's closing price yesterday.
Avis Chief Executive Officer Ronald Nelson is following through on a May 3 letter in which he said he was interested in making a "substantially higher" bid for Dollar Thrifty than Hertz's $1.2 billion offer. The proposal may draw higher bids from both Hertz and Avis, said Fred Lowrance, an analyst with Avondale Partners LLC.
"Through an economic recovery and shrewd management decisions, Dollar Thrifty has turned itself into a very valuable asset," Lowrance said yesterday in an interview from Nashville, Tennessee. "Both of these companies know that, and they're both willing to pay more."
Avis, in its offer letter yesterday, said Dollar Thrifty should require Hertz to eliminate two provisions in its bid -- a $44.6 million breakup fee and the right to match competing offers -- in return for permission to continue making offers for the company.
Hertz on April 26 offered $41 a share in cash and stock for Dollar Thrifty to add to its namesake and Advantage brands and extend its lead over Avis as the economic recovery spurred travel.
Dollar Thrifty fell $1.18, or 2.4 percent, to $47.50 at 5:43 p.m. after the close of regular New York Stock Exchange trading. Avis fell 9 cents to $10.99.
Dollar Thrifty gained 25 percent through yesterday since the day before Hertz's offer was announced in April. The shares traded for less than $1 as recently as March 2009.
Offer Financing
Avis said the cash portion of its offer would be funded with available cash and committed financing. The company on July 27 completed amendments to credit facilities that it said would allow it to make an offer for Dollar Thrifty.
"We continue to believe that a combination with Avis Budget presents a compelling opportunity for our respective stakeholders and the prospect for your shareholders to obtain the highest value for their investment," Nelson said in a letter to Dollar Thrifty's management that was included in the statement.
Tulsa, Oklahoma-based Dollar Thrifty has scheduled a special meeting of its stockholders to vote on Hertz's bid for Sept. 16.
Investors in recent months have been betting on the final offer price, said John Healy, an analyst at Northcoast Research Holdings in Cleveland.
'Line in the Sand'
"It's just impossible to know where the line in the sand is," he said. "The only thing we do know is where will it be accretive, and this asset will be accretive to both companies at a purchase price into the mid-$50s."
Richard Broome, a spokesman for Park Ridge, New Jersey- based Hertz, and Kindra Marts, a spokeswoman for Dollar Thrifty, didn't immediately return voicemail messages seeking comment.
Citigroup Inc. and Morgan Stanley are providing financial advice to Avis, and Kirkland & Ellis LLP and Arnold & Porter LLP are acting as legal counsel.
Barclays Plc and Bank of America Corp.'s Merrill Lynch advised Hertz on its April offer, with Debevoise & Plimpton LLP and Jones Day providing legal advice. Dollar was advised by JPMorgan Chase & Co., Goldman Sachs Group Inc. and law firm Cleary Gottlieb Steen & Hamilton LLP.
To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net