While an improving economy has largely eliminated the existential threat that many major automakers

Valued at $2.3 billion, the deal also involved Parsippany, New Jersey-based 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 another company: Zipcar (ZIP NASDAQ).  New concepts like Cambridge, tracking airline flight Massachusetts-based Zipcar may threaten the relatively thin margins tracking airline flight of the industry s three major players.  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 increasingly entrenched 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. tracking airline flight The company maintains a global fleet of over 525,000 passenger 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 tracking airline flight 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 tracking airline flight 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 tracking airline flight was eventually purchased by a private capital consortium. While this stipulation was unsurprising, it served as a potent reminder to industry observers that the rental car market tracking airline flight has become quite concentrated.
In addition to Hertz and Avis, privately-held Enterprise Rent-a-Car 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 to pan out, Enterprise cannot be ignored.
Although it remains tracking airline flight 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 tracking airline flight off  the Zipcar threat late last year with an attractive takeover offer that valued the start-up tracking airline flight at more than $500 million.
However, the car-sharing industry s barriers to entry are relatively tracking airline flight low. Zipcar s development was initially slow and low-key: The company started by opening pilot car-sharing programs near major U.S. university campuses and fine-tuned its business model before rolling tracking airline flight 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 tracking airline flight States.
In fact, the automobile industry s long-term secular challenges may provide tracking airline flight some hidden benefits for Hertz, Avis and the nascent tracking airline flight 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 tracking airline flight 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 tracking airline flight in the U.S. and Europe to decline in the face of rising tracking airline flight fuel prices and changing settlement patterns. Many young, affluent American millennials choose to live in densely-populated neighborhoods and have little need for expensive personal vehicles.
tracking airline flight 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 with shorter time horizons may wish to look at smaller players within this space.
Want Profitable Special Situation tracking airline flight and Arb Ideas? Certain tracking airline flight special situation strategies have beat the market by 13.4% annually! Get in-depth reports, watch-lists, and more so you can capitalize on some of the best situations.
All investing has risks. It is possible to lose all your money. This website and all information on it is some entertainment purposes only. ArbIdeas and any affiliates are not brokers, dealers, financial planners, portfolio mangers, or any other designation. ArbIdeas and affiliaties are not liable for any loses.