Buyout Firms Bid for Hertz

Clayton, Dubilier & Rice Inc. and Carlyle Group are part of a buyout group that plans to acquire Hertz Corp., the largest U.S. car-rental company, from Ford Motor Co., people familiar with the matter said.

Clayton Dubilier of New York and Washington-based Carlyle, along with Merrill Lynch & Co.’s private equity unit, have offered $5 billion in cash for Hertz, plus they would assume about $10 billion of debt, said the people, who declined to be identified. A deal may be announced as soon as today, the sources said.

It would be the largest leveraged buyout since Kohlberg Kravis Roberts & Co. paid $31 billion for RJR Nabisco Inc. in 1989.

Ford, the No. 2 U.S. automaker, is selling Park Ridge, N.J.-based Hertz to raise cash as it loses market share to rivals led by Toyota Motor Corp. Ford’s North American business has been unprofitable for three of the last four quarters. Chief Executive William Clay Ford Jr. has promised to increase earnings.

“The cash raised would be used to help fund Ford’s restructuring,” said Brian A. Johnson, an analyst at Sanford C. Bernstein & Co. in New York.

Clayton Dubilier spokesman Tom Franco, Carlyle spokesman Chris Ullman and Merrill spokeswoman Terez Hanhan declined to comment. Ford spokeswoman Becky Sanch and Hertz spokesman Richard Broome also declined to comment.

Hertz rents cars from 7,400 locations in more than 150 countries. The company’s net income more than doubled last year to $365.5 million. Revenue was $6.7 billion. Ford earned $3.49 billion on net sales of $171.7 billion in 2004.

Ford has owned all of Hertz since 2001, when it spent $707 million to buy back an 18.5% stake that it had sold to the public four years earlier. Dearborn, Mich.-based Ford had considered selling shares of Hertz in an initial public offering before deciding to accept takeover bids.

Hertz has been in the car-rental business since 1918 and in the equipment rental business for more than 40 years. It has partnerships with more than 60 airlines, railroads and hotel chains throughout the world, as well as with credit card company American Express Co. and Internet travel company Expedia Inc.

Clayton Dubilier, Carlyle and New York-based Merrill have been bidding for Hertz against a group that includes Blackstone Group and Texas Pacific Group, sources said.

Blackstone spokesman John Ford declined to comment and Texas Pacific spokesman Owen Blicksilver didn’t return calls.