Hertz says not to raise offer for Dollar Thrifty

Dollar Thrifty shares fell about 3 percent to $50.55, while Hertz rose more than 8 percent to $11.31 on the New York Stock Exchange. Avis shares were up 4 percent.

In a statement, Hertz said its raised bid earlier this month -- currently worth about $1.44 billion -- was its "best and final" offer.

On Thursday, Avis Budget , which is trying to wrest Dollar Thrifty away from Hertz, raised its bid to about $1.51 billion, or $52.71 per share, based on Avis' last closing price, but refused to include a break-up fee.

Dollar Thrifty has rejected Avis' two previous bids due to worries that Avis may not be able to close its bid for antitrust reasons.

"It's a smart move by Hertz," said Avondale Partners analyst Fred Lowrance said. "Hertz offer is good enough to get approved by shareholders."

Hertz and Avis have been sparring over Dollar Thrifty since April. Low-cost brands like Dollar Thrifty -- one of the few major car rental companies to post a profit in 2009 -- have become increasingly important in the rental industry as consumers try to save money in tight economic times.

Both the companies have already begun the process of obtaining antitrust approval. But Hertz is thought to have a clearer path because it mostly focuses on more expensive segments of the car rental market. Avis already has a budget brand that competes with Dollar Thrifty.

"We have antitrust clearance in Canada, unlike Avis, and our progress with the U.S. government makes us highly confident that we can close the transaction in a timely manner within the framework of our merger agreement," Hertz CEO Mark Frissora said in a statement on Friday.

Hertz also said it was confident of getting Dollar Thrifty shareholders' approval for its offer.

Several investors have voiced their opposition to the Hertz deal saying it undervalues the company but the Dollar Thrifty management has preferred Hertz to Avis citing certainty over deal closure.

Various institutional investors had sued unsuccessfully to block a shareholders' vote on the Hertz deal, arguing that the Dollar Thrifty board breached its fiduciary duty to shareholders by failing to conduct an auction for the company and by agreeing to a meager premium to the market price of the company's stock.

"Failure to approve the Hertz agreement could leave Dollar Thrifty without any transaction," Hertz's Frissora said.

Northcoast Research analyst John Healy said the gap between investor expectations and what Hertz was willing to pay has narrowed dramatically over the last few weeks.

"I think there is a higher likelihood of a Hertz deal getting approved today than it was a month ago," said Healy, adding that it was still difficult to predict the outcome of the shareholder meeting.

Dollar Thrifty's shareholder are set to vote on the Hertz deal at a meeting scheduled for September 30.

Avis has suggested that Dollar Thrifty should hold its shareholder meeting only after the Federal Trade Commission completes its review of both offers.

(Reporting by A.Ananthalakshmi in Bangalore; Editing by Saumyadeb Chakrabarty and Gopakumar Warrier)

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