Hertz backers cash in $1 billion of shares

Three private equity firms will raise up to $1 billion by cashing in their shares in US car rental company Hertz, while retaining a majority stake. It is the third time they have taken money out of the business.

The three private equity owners of Hertz, one of the biggest car rental companies in the US, plan to raise about $1 billion (€744 million) by selling some of their shares in the business.

Hertz has proved a profitable investment

Clayton Dubilier and Rice, The Carlyle Group and Merrill Lynch’s buyout arm will sell about 45 million shares in a public offering, according to a regulatory filing with the US Securities and Exchange Commission. Goldman Sachs, Lehman Brothers and Merrill Lynch, who are underwriting for the offering, will also have the option to buy another 6.8 million shares to cover over-allotments.

The price of the offering, which will dilute the three firms’ stake from 72 percent to just over 50 percent, has not been specified. However, based on yesterday’s closing share price of $20.97, it would be worth about $1.09 billion.

The three firms, who will divide the proceeds between them, have seen the value of their stake rise by about 40 percent since the initial public offering six months ago, when the shares were priced at $15.

Hertz is proving a lucrative investment for the three groups, who paid about $14 billion to buy the business from Ford Motor Company in December 2005. The deal included a $2.3 billion equity cheque, while the firms also took on $5.6 billion of corporate debt and borrowed about $6.9 billion against its international vehicle fleet.

Six months later they refinanced the business, borrowing a further $1 billion to pay themselves a dividend. They then took a special cash payment of $421.5 million when they floated the business on the New York Stock Exchange in November 2006, at which point the company’s equity was valued at $5.65 billion.

At Hertz’s closing price of $20.97 yesterday, the company has a market capitalisation of $6.72 billion.