Ford to Sell Hertz to Investment Group

PARK RIDGE, N.J. — In order to raise cash and focus on its struggling automotive business, Ford Motor Co. last month announced an agreement to sell its wholly owned subsidiary Hertz Corp., including Hertz Equipment Rental Corp., to a group of private equity firms. The transaction was valued at about $5.6 billion for the equity of Hertz and a total value of approximately $15 billion including debt.

The acquiring investment group is composed of Clayton Dubilier & Rice, The Carlyle Group and Merrill Lynch Global Private Equity.

“This transaction reinforces our commitment to strengthening our balance sheet and investing in our core automotive business,” said Ford executive vice president and chief financial officer Don Leclair. “The cash will help Ford's liquidity and provide it with capital for health care and product development.”

To finance the acquisition, the investors are using $2.3 billion in cash and assuming the remaining amount as a debt.

The investors have made no public statement regarding its plans for the equipment rental division, but speculation in the financial community has been that the new Hertz owners would eventually divest HERC.

“I don't know what [the ownership group] will do regarding Hertz Equipment Rental, but HERC is a great company with very talented management,” Dan Kaplan, CEO of Daniel Kaplan Associates and former CEO of HERC, told RER. “If divestiture of HERC is pursued, HERC will command a significant price.”

In connection with the transaction, Hertz plans to commence a cash tender offer for up to $2.3 billion of certain of its outstanding debt securities, and certain other Hertz debt will be refinanced.

The acquisition is subject to customary conditions and regulatory approvals and is expected to be finalized by the end of 2005.

HERC, based in Park Ridge, N.J., is No. 3 on the RER 100, based on estimated North America equipment rental revenues of about $928 million and estimated total revenues of almost $1.3 billion. It has about 265 equipment rental locations in North America and close to 100 more in Spain and France.

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