Hertz to spin off equipment unit, focus on cars

Hertz spinoff
Passengers board a Hertz courtesy bus outside Los Angeles International Airport.
(Wally Skalij / Los Angeles Times)

Hertz Corp. said it will spin off its equipment-leasing unit into a separate publicly traded company, a move that will allow it to concentrate on renting cars.

The two new companies will be Hertz, which operates the Hertz, Dollar and Thrifty car rental companies; and Hertz Equipment Rental Corp., which rents bulldozers, power tools, air compressors and other equipment, the company said in a news release.

Hertz said in a statement that the move will allow it to focus on its auto business, including the expansion of its off-airport footprint. It also will reduce earnings volatility, increase returns on invested capital and improve free cash flow growth, Hertz said.

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Mark P. Frissora, Hertz’s chairman and chief executive, said the separation “will create separate companies which we expect to benefit from improved financial profiles that include increased earnings stability and higher returns on capital.”

“Through unbundling these undervalued assets, we unleash current and future shareholder value,” Frissora said. “Additionally, the separation will help each business focus on its strategic and operational performance.”

Hertz will receive about $2.5 billion from the spinoff and will use the money to pay down debt and to repurchase about $1 billion of its shares.

Hertz shares were down 53 cents, or 2%, to $26.69 at 8:30 a.m. PDT.


The company said it expects the transaction to close by early 2015.

Bloomberg News said analysts have been pressing Hertz to separate the business units.

Kevin Milota, an analyst with JPMorgan Chase & Co., said in a research note that he expects investors “will receive the HERC spin announcement with open arms.”

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