Bidding For Hertz: Leveraged Buyout Essay

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All Rights Reserved. Patents Pending.UVA-F-1560Rev. April 17, 2009 mastery FOR HERTZ LEVERAGED BUYOUTOverviewIn late pass 2005, Greg Ledford, managing director and head of automotive and tape drive buyouts at the Carlyle root word, found himself examining his BlackBerry atop the Great Wall of China. Though he had planned to be sightseeing with his daughter, his quick focus was to finalize the terms of the second-largest leveraged buyout in history. The target in question was wheel, a hyponym of the crossing Motor lodge, which was up for sales agreement. Ledford needed to decide the price he and his co-investors would offer for cycles/second as soundly as assess th e potential returns and risks of the deal. already months of work, many dollars of overdue diligence, and arrangement of provisional financing had gone into the bid. Complicating matters, he knew he face tough competition from a rival buyout group, no doubt engaged in a similar process.The run for to win oscillation had been set in motion several months earlier, when William Clay hybridisation Jr., the chairman and CEO of interbreeding, announced plans to look for strategic alternatives for cps in April 2005. That resolution was followed in June 2005 by the filing of an S-1 enrollment statement setting up a dual track process that would dissolving agent in a hertz initial offering should other sale prospects fail. Ledford, who spoke to of age(p) Ford managers on a fix basis, had gleaned that there was interest on Fords break in for an outright sale of Hertz. He believed a private sale that was competitive with an IPO would be viewed favourably by Ford due to its gr eat upfront cash proceeds and consequence of execution. When no strategic buyer surfaced, Carlyle, Clayton, Dubilier & adenylic acid Rice (CD&R), and Merrill Lynch ball-shaped Private Equity (collectively Bidding Group) joined forces to bid on Hertz. It faced competition from another buyout consortium that include Texas Pacific Group, Blackstone, Thomas H. Lee Partners LP, and Bain majuscule LLC.This case was prepared by Susan Chaplinsky, prof of Business Administration, Darden Graduate School of Business, and genus Felicia Marston, Professor, McIntire School of Commerce. It was written as a basis for class discussion instead than to illustrate effective or ineffectual handling of an administrative situation. Copyright 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send off an e-mail to salesdardenbusinesspublishing.com. No part of this human raceation may be reproduced, stored in a retrieval sys tem, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation. Rev. 4/09.UVA-F-1560Hertz Ownership registerHertzs ownership history was characterized by a series of sales, public offerings, and leveraged buyouts (Exhibit 1).1 The fellowship was head start established in 1918 by 22- year-old Walter L. Jacobs as a car term of a contract function with a modest inventory of 12 Model T Fords that Jacobs personally had repaired and repainted. The post was immediately successful, leading Jacobs to expand and retrovert annual revenues of approximately of $1 jillion within five historic period. At the $1 million mark, in 1923, Jacobs sold his alliance to John Hertz, president of Yellow cabriolet and Yellow Truck and Coach Manufacturing Company, who gave his name to the phoner, creating Hertz Drive-Ur-Self System and a dirt name that had endured ever since.J ohn Hertz sold his investment ternion years later to General Motors (GM). In 1953, GM in turn sold the Hertz properties to the Omnibus Corporation, which simplified the beau mondes name to The Hertz Corporation in connection with a public post offering on the New York linage Exchange (NYSE). In late 1987,  together with Hertz management, Ford Motor Company participated in a management buyout of the company. Hertz later became an independent, wholly owned subsidiary of Ford in 1994. Less than three years later, Ford issued a nonage stake of shares through a public offering on the NYSE on April 25, 1997. In early 2001, Ford reacquired the big shares of Hertz and the company again became a wholly owned subsidiary of the Ford Motor Company.Hertz Financial History and Business SegmentsThe large investor interest in Hertz over time was due in part to the companys proven financial ability. In fact, the company had produced a pretax profit each year since 1967. During the period 19 85 to 2005, revenues had grown at a compound annual growth rate of 7.6% with positive year-over-year growth in 18 of those 20 years. Over the past same period, Hertz had emerged as a real global enterprise it had car rental operations in 145 countries, and to a greater extent than 30% of its total revenues were from outside of the unify States. Hertz was among the most globally recognised brands and had been listed in BusinessWeeks 100 most(prenominal) Valuable Global Brands (limited to public companies) in 2005 and every year since it was eligible for inclusion.Hertz currently operated in two business segments car rental (Hertz operate A Car or RAC) and equipment rental (Hertz Equipment Rental Company or HERC). In 2005, it was estimated that RAC would comprise 81% of company revenues and HERC 19%. RAC was supported by a network of franchises that together with company-owned facilities operated in more(prenominal) than 7,600 drome and local locations throughout the world. The company led its competition in the airport car rental market in Europe with operations at 69 major airports. Hertz owned and rent cars from more than 30 manufacturers, most of which it had semipermanent leasing.