The transaction has been approved by the boards of directors of both companies, and by the stockholders of Donlen. The transaction is expected to be completed in the third quarter of 2011, subject to the satisfaction of customary closing conditions, including regulatory approvals.
Mark P. Frissora, the Chairman and Chief Executive Officer of Hertz, said, “The acquisition of Donlen expands our portfolio of transportation solutions by giving Hertz an immediate leadership position in long-term car, truck and equipment leasing and fleet management for corporate customers who need scale and sophisticated fleet management services. This range of solutions from a single provider will make Hertz unique among its peers.” Frissora added, “The integration of Donlen gives Hertz a yearly and multi-year offering that complements our hourly, daily and monthly car sharing and car rental options for customers, giving us a more stable revenue stream and new adjacent markets to leverage our existing business model.”
The acquisition of Donlen is consistent with the evolution of Hertz’s asset-light, technology focused business model. Donlen is primarily a vehicle financing and fleet management consulting business which deploys leading technology applications to support its customers.
Additionally, this transaction is part of the Company’s overall growth strategy to provide the most flexible transportation programs for corporate and general consumers. Donlen’s technology platform is best-in-class and scalable to enable rapid volume expansion. Together with Donlen’s existing relationships, Hertz will now be able to significantly expand its fleet management capability to Europe and other international markets. Additionally, the Donlen acquisition provides Hertz with a strategic consulting practice in asset and fleet management with an industry leading reputation for its GreenDriver(R) telematics initiative such as DriverPoint(TM), which tracks and measures driver behavior and productivity.
“We’re thrilled to be part of the Hertz global family,” said Gary Rappeport, Donlen Chief Executive Officer. “There are a number of synergies between the two businesses that will allow us to expand and accelerate Donlen’s offerings and continue our passionate focus on customer service and technology. Together, Hertz and Donlen have a unique opportunity to explore and create new and innovative products to bring to market.”
Based in Northbrook, Illinois, Donlen leases and manages more than 144,000 vehicles across the United States, Canada and Mexico. Donlen has posted consistent growth in pre-tax income since 2000, including 2008 and 2009 in the midst of the recession.
Donlen generates revenue through its high-quality, diversified lease portfolio and its fee-based fleet management and services business, which have produced consistent results throughout its history, including recessionary periods. Donlen further differentiates itself from traditional leasing companies by providing services throughout the leasing life-cycle and a variety of management and maintenance services. Donlen has distinguished itself as a technology leader in the industry, through FleetWeb(R), Donlen’s award-winning online fleet management platform that provides enhanced customer service capabilities, and CARE(TM), Donlen’s proprietary CRM system; as well as Donlen’s more than 45 years in fleet management industry experience.
Hertz is purchasing Donlen for $250 million, and will be assuming approximately $680 million of Donlen’s outstanding fleet debt. Hertz expects to refinance Donlen’s debt at improved financing terms. Hertz believes the acquisition will be credit neutral and will strengthen its business profile given Donlen’s business mix and diversified lease portfolio. This transaction is immediately accretive to Hertz’s earnings and is EVA positive in year one. Hertz has identified $20 million of synergies, primarily fleet-related.
Hertz will host a conference call on Monday, July 18, 2011 at 11:00 AM (EDT) to provide more detailed information about the Donlen transaction. Mark Frissora and Gary Rappeport, CEOs of Hertz and Donlen, respectively, will speak during the conference call. Listen via webcast at www.hertz.com/investorrelations The conference call will be available for replay from July 18, 2011 from 1:00 PM (EDT) until August 1, 2011 at 11:59 AM (EDT) by calling 800-475-6701 in the U.S. or 320-365-3844 for international callers with the access code: 2107683. The press release and accompanying slides will be available on our website, www.hertz.com/investorrelations.
Hertz is being advised in this transaction by Seale & Associates, Inc. and Barclays Capital and Donlen’s advisor is J.P. Morgan Securities LLC. Jenner & Block LLP is acting as mergers and acquisitions counsel to Hertz and Weil, Gotshal & Manges LLP is providing advice regarding structured finance matters. Skadden, Arps, Slate, Meagher & Flom LLP is serving as seller’s counsel on behalf of Donlen.
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