Hertz to Spin Off Equipment Renting Business - Analyst Blog
2014年3月19日 - 12:00AM
Zacks
Shares of vehicle rental giant, Hertz Global Holdings
Inc. (HTZ), witnessed a significant 7.7% rise in the
pre-market trading session today as the company communicated the
spin-off of its construction equipment rental business a short
while ago. This news was earlier reported by Financial
Times on Friday evening, triggering a 4.8% rise in
the company’s shares during Monday’s trade.
The board at Hertz announced its decision to separate the company
into two independent, publicly traded companies. The first company
will retain Hertz’s car rental businesses comprising Hertz, Dollar,
Thrifty and Firefly as well as its fleet leasing services division
called Donlen. The second company emerging from the separation will
be named ‘Hertz Equipment Rental Corporation’ or ‘HERC’ and will
comprise the company’s equipment rental business.
The spin-off, which will be a tax-free transaction for Hertz’
shareholders, is expected to generate $2.5 billion proceeds for the
company. Hertz plans to use the proceeds to lower debt and fund a
newly approved $1 billion share buyback program. The share
repurchase program, which will commence following the completion of
the spin-off, will replace the company’s existing $300 million
buyback program.
The spin-off is expected to improve the financial profiles of both
companies, ensuring stabilized earnings as well as higher returns
on capital. Further, it will help improve management focus on each
of the separated businesses, which enjoy a leading position in
their respective markets.
Hertz as an independent car rental company (post spin-off) will
operate from nearly 11,555 rental locations throughout North
America, Europe, Latin America, Asia, Australia, Africa, the Middle
East and New Zealand, marking the biggest car renting network
across the globe.
Major points of focus for this car renting behemoth following the
separation will include the smooth integration of Dollar Thrifty,
growing its off-airport presence and efficient fleet management,
promoting mobile services to meet customer requirements, further
developing its Donlen leasing business, introducing new rental
technology and efficiently managing costs through its Lean/Six
Sigma programs.
Further, with an improved financial profile following the
separation, the company targets a corporate leverage ratio of 2.5x
to 3.5x net debt / EBITDA. Hertz’s car rental and fleet leasing
business generated annual revenues of $9.23 billion in fiscal
2013.
On the other hand, the newly formed HERC will be positioned as the
world’s leading and most diversified equipment leasing business.
Operating through a network of 335 branches in the United States,
Canada, France, Spain, China and Saudi Arabia, as well as through
international franchisees, the company generated annual revenues of
more than $1.5 billion in fiscal 2013. As a separate entity, HERC
targets a leverage ratio of 3.5x to 4.0x net debt / EBITDA, with
its capital allocation primarily focused on fleet investment to
drive growth, acquisitions and debt reduction.
Following the separation, Hertz will continue to be led by its
existing Chairman and Chief Executive Officer, Mark Frissora, while
HERC will determine its board members and management positions once
the separation is finalized.
Quoting a similar transaction, Sears Holdings
Corp. (SHLD) recently reached the final stages of its
previously announced spin-off of Lands’ End. Slated to complete the
spin-off on Apr 4, 2014, the company will be divided into two
companies, Sears Holdings Corp., retaining the same ticker symbol
and Lands’ End Inc. with a new ticker symbol “LE”.
Other Stocks to Consider
Hertz currently holds a Zacks Rank #3 (Hold). Better-performing
stocks in the business services industry include SouFun
Holdings Ltd. (SFUN) and Rentrak
Corporation (RENT). While SouFun Holdings has a Zacks Rank
#1 (Strong Buy), Rentrak carries a Zacks Rank #2 (Buy).
HERTZ GLBL HLDG (HTZ): Free Stock Analysis Report
RENTRAK CORP (RENT): Free Stock Analysis Report
SOUFUN HLDG-ADR (SFUN): Free Stock Analysis Report
SEARS HLDG CP (SHLD): Free Stock Analysis Report
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