Avis Confirms It Has Received an Unsolicited Purchase Offer
Car renter Avis Inc. confirmed Monday that it has been approached by a potential suitor, but the company wouldn’t say whether it is negotiating a sale to motel and real estate franchiser HFS Inc.
The Wall Street Journal reported Monday that HFS is in preliminary talks to buy the company in a transaction that could total more than $1 billion including debt.
Avis spokeswoman Demetria Mudar said the employee-owned company received an unsolicited proposal by a publicly held company in recent weeks but it would not elaborate.
HFS Chairman and Chief Executive Henry Silverman neither confirmed nor denied the talks, although he said the company is interested in entering the car rental business. The industry “has intriguing synergies,” he said Monday in an interview at a hotel conference in New York.
HFS stock rose 25 cents to $62.625 on the New York Stock Exchange. Over the last year, HFS’ stock more than doubled. Last month, HFS sold $1.04 billion of common stock to help pay for acquisitions.
The purchase of Avis would bring HFS into a third industry and continue a string of big acquisitions for the Parsippany, N.J.-based company. Last month, the parent of the Century 21 real estate brokerage agreed to buy Coldwell Banker Corp. for $740 million to extend its position as the largest franchiser of real estate brokerages. It’s already the largest franchiser of hotels, including Days Inn and Howard Johnson.
An acquisition of Avis would need the approval of General Motors Corp., which owns preferred stock convertible into a 29% stake in the Garden City, N.Y.-based company.
Silverman has said he would steer HFS toward another business, a strategy that would supply “the third leg of the stool.” One likely synergy between HFS and Avis would be renting cars to travelers staying at HFS hotels. Such cross-marketing should keep earnings rising: HFS earnings climbed 49% last year to $79.7 million on revenue of $361.2 million.
A franchiser typically sells the right to use its name, resources and business practices. The franchiser collects a monthly fee and royalties for providing the franchisee with marketing, accounting and other services.
The car rental industry and Avis, which was sold to its more than 12,000 employees nine years ago through an employee stock option program, has had problems in recent years as competition intensified, financing costs rose and car makers doubled the price of the fleets they sell to rental agencies.
