AutoNation to Spin Off Rental Business
With a new CEO behind the wheel, auto-services giant AutoNation Inc. on Thursday signaled another detour from a consolidation strategy by announcing a spinoff to shareholders of its $3.5-billion car-rental business.
After the planned tax-free spinoff of its Alamo, National and CarTemps USA subsidiaries, Fort Lauderdale, Fla.-based AutoNation will operate only what is by far the largest U.S. group of car dealers. That business is now shifting to mainly selling new autos, whereas it had been focused on used cars.
AutoNation will remain on the prowl for new-car outlets. It has exited waste-hauling, billboards and home alarms. The company owns 412 dealerships and 42 AutoNation USA used-vehicle stores in 24 states.
AutoNation’s board determined that spinning off the rental car units as an independent company would be the best way to provide value to shareholders, AutoNation Chairman Wayne Huizenga said in a news release.
AutoNation shares, which touched an all-time peak of $44.37 in 1997, closed up 56 cents at $12.50 on the New York Stock Exchange.
“We are very pleased to be rewarding AutoNation shareholders with stock in what will be one of the largest publicly traded automotive rental companies in the world,” Huizenga said.
AutoNation said the Internal Revenue Service had issued a favorable ruling on the spinoff, which the company expects to complete in January. AutoNation will issue one share of the car rental company for every six to eight shares of AutoNation. Final terms will be fixed later, the company said.
Huizenga, best known for leading Blockbuster during the video retailer’s early-1990s boom, took control of AutoNation in 1995, when the company was known as Republic Industries. Huizenga bought car rental and other businesses and said combining those with Republic’s fledgling AutoNation chain of big secondhand-car sellers offered a great opportunity for marketplace synergies.
More recently, however, operations have been shut, marketing plans changed, businesses sold and top managers shuffled. The company also recently doubled to $1 billion a share-buyback plan.
Last week, Huizenga hired veteran U.S. car-retailing executive Michael Jackson, 50, as chief executive, replacing himself and his protege, Steven Berrard, as co-CEOs.
Jackson, most recently head of Mercedes-Benz USA, said he intends to stress the Internet to sell cars as AutoNation moves to owning sales outlets in each of the 50 states.
