Under the terms of the agreement, Hertz will pay $87.50 a share in cash for Dollar Thrifty, creating one of the world’s largest car rental companies. The deal represents a premium of 8% to Dollar Thrifty’s closing price on Friday.
"We are pleased to have finally reached an agreement with Dollar Thrifty after a lengthy – but worthwhile – pursuit,” Hertz CEO Mark Frissora said in a statement.
Hertz and Avis Budget (CAR) have made several offers for smaller competitor Dollar Thrifty. However, regulators had long opposed a deal, fearing it would create too large of a car rental company in an industry that has gone through considerable consolidation and is now controlled by just a handful of large companies.
In a bid to win regulatory approval for the deal, Hertz agreed to sell its budget brand Advantage for an undisclosed amount of money.
Shares of Tulsa, Okla.-based Dollar Thrifty climbed more than 7.4% and touched a 52-week high of $87.05 on Monday. Its shares have climbed nearly 174% since the beginning of April 2010 when Hertz first offered to buy it for $1.2 billion.
Hertz’s shares are up about 12.5% to $14.80, while those of Avis are up about 6.9% to $17.10. The two car rental companies, along with Enterprise Rent-A-Car, control about 75% of the market.
As of June 30, Hertz and Dollar Thrifty together had $10.2 billion in sales and an EBITDA of about $1.8 billion across 10,000 locations globally. Hertz said it anticipates annual cost synergies of at least $160 million from the transaction.
The buyout, which will be structured as a two-step acquisition including a cash tender offer followed by a cash merger, ends a two-year standoff between the two and once and for all edges out rival Avis.
Avis and Park Ridge, N.J.-based Hertz had been in a bidding war for Dollar Thrifty since 2010. In September of last year, Avis finally scrapped its offer, leaving Hertz as the lone company vying to become Dollar Thrifty’s suitor.