The Federal Trade Commission had a tremendous amount of influence over the final outcome of this tra

Valued at $2.3 billion, the deal also involved Parsippany, New Jersey-based american airlines flight information Avis Budget Group (CAR NASDAQ). Although it walked away from a bidding war over Dollar Thrifty, Avis did purchase Avis Europe in 2011 in a move to expand into the world s second-largest rental car market and are now about to purchase american airlines flight information another company: Zipcar (ZIP NASDAQ).  New concepts like Cambridge, Massachusetts-based Zipcar may threaten the relatively thin margins of the industry s three major players. american airlines flight information Overall, the deals reinforced the prevailing thesis about the rental car industry: While the market is not actively in decline, its major players are becoming american airlines flight information increasingly entrenched american airlines flight information and can look forward to fighting similar battles in the future.
Park Ridge, New Jersey-based  Hertz  is a car and equipment rental company that works with business and leisure travelers as well as contractors, home-builders and project managers. The company maintains a global fleet of over 525,000 passenger american airlines flight information cars. These come in virtually every make and model. Hertz also has several thousand pieces of heavy equipment on hand, including earth-movers, generators, pumps and dump trucks. Finally, it sells its used rental cars at nine different terminals around the world. The company operates primarily in North America, the European Union and Australia. In 2012, Hertz earned $243 million on about $9 billion in gross revenues.
The deal between Hertz and Dollar Thrifty was relatively straightforward. Under its terms, Hertz issued cash payments of $87.50 per share to each Dollar Thrifty shareholder. This provided Dollar s shareholders with an immediate 8 percent premium and represented a two-fold increase in the $41-per-share offer that Hertz had made for the company in mid-2011.
The Federal Trade Commission had a tremendous amount of influence over the final outcome of this transaction. Before blessing the deal, the regulatory agency forced Hertz to divest completely from its low-margin Advantage Rent-a-Car division. Advantage was eventually purchased by a private capital consortium. While this stipulation was unsurprising, it served as a potent american airlines flight information reminder to industry american airlines flight information observers that the rental car market has become quite concentrated.
In addition to Hertz and Avis, privately-held Enterprise Rent-a-Car american airlines flight information has staked out its claim to a sizable portion of the U.S. rental car market. Due to its size, there was serious speculation that Enterprise would jump into the bidding-war fray and make an offer on Dollar Thrifty. Although this failed american airlines flight information to pan out, Enterprise cannot be ignored.
Although it remains far smaller than the three major players, Zipcar s innovative car-sharing model may eventually threaten the basic business model that has driven the rental car industry s profits for years. Anticipating such a development, Avis  headed off  the Zipcar threat late last year with an attractive takeover offer that valued the start-up at more than $500 million.
However, the car-sharing industry s barriers to entry are relatively low. Zipcar s development was initially slow and low-key: The company started by opening pilot car-sharing programs american airlines flight information near major U.S. university campuses and fine-tuned its business model before rolling out its service to the general public. With the car-sharing market expected to expand by several orders of magnitude during the coming decade, it is likely that Zipcar will not be the last ride-sharing start-up to come out of the United States.
In fact, the automobile industry s long-term secular challenges may provide some hidden benefits for Hertz, Avis and the nascent car-sharing business. Although the American rental car business is now so heavily  consolidated  that the FTC must subject any further deals to lengthy regulatory reviews, the concept of pay-per-use driving is still in its infancy.
While an improving economy has largely eliminated the existential threat that many major automakers faced just a few years ago, long-term guidance out of relatively North American healthy companies like Ford (F NYSE) and General Motors (GM NYSE) has not been encouraging. Over the next five to 10 years, most industry observers expect car ownership figures american airlines flight information in the U.S. and Europe to decline in the face of rising fuel prices and changing settlement patterns. Many young, affluent American millennials choose to live in densely-populated american airlines flight information neighborhoods and have little need for expensive personal vehicles.
Car-sharing and car rental services look to benefit from this trend. As such, Hertz appears to offer a low-risk, moderate-reward long-term investment opportunity for cautious investors. At the same time, it may not be a prime arbitrage target. After all, it is not a buyout target. Accordingly, investors american airlines flight information with shorter time horizons may wish to look at smaller players within this space.
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