Presented By: Raghav Bhatter, Shikhar Agarwal

Hertz
Hertz Company
Company Overview
Overview
CCM
CCM
Deal
Deal Structure
Structure

Conclusion
Conclusion

Ford Motor
Company

Hertz
Corporation
CD&R

Carlyle
Group
and Merill
Lynch

Off/On-airports
1,77 million cars

RAC
Hertz
HERC

$4.5 bln market

revenues
180 largest
airports

Off/On-airports
12% share of the
market
$1.5 bln market
revenues

The third largest

company
$1.3 bln revenue

The fourth
largest company
$152 mln
revenue

USA

Europe

Region

Hertz
Hertz Company
Company Overview
Overview
CCM
CCM
Deal
Deal Structure
Structure

Conclusion
Conclusion

 PE investment Firm Founded in 1978.

Investments in More than 50 US and

European Businesses.
Specialized in Acquiring Under
Managed Divisions.

 American

Based Global Asset

Management Firm.
Found in 1987 by 5 partners as a
Boutique investment banking firm.
Began Investing as a Private Equity
firm in 1990 and has invested more
than USD53 Billion in over 450
investments.

 Founded

in 1914 by Charles E Merrill

as an investment firm.
Managed Assets worth more than
USD2 Trillion before its acquisition by
Bank of America.

YEAR 2002

YEAR 2003

CD&R began studying the

rental car business (RAC).
Early in its investigation, CD&R
studied Budget and Alamo.
Hertz Much more attractive.
Ford dismissed the proposal as
uninteresting and unfeasible.
CD&R financing challenge
Securitizing Hertzs rental fleet
in cooperation with Lehman
Brothers and Deutsche Bank
New proposals.

CD&R convinced that Hertzs

capital structure was inefficient.
New visit to Ford The deal
could be indeed financed.
Hertz was non-strategic to Ford.
Ford executives remained
unconvinced as well as Hertzs
CEO.

YEAR 2005
Early 2005 Ford core US auto business was in trouble.
Monetizing Hertz One step to improve Ford balance sheet.
Ford advisors recommended two tracks:
IPO Filed in June
Sale of the business Proposal and preliminary bids by
July

Ford made confidential financing and operating information.

Hertz executives Informational meetings with potential buyers.
After a month of due diligence, CD&R identified several specific
opportunities for improving operations.

 However,

to go ahead with the Deal

CD&R needed more partners and it
approached The Carlyle Group and
Merrill Lynch who were more than
happy to be a part of the Deal.

 US RAC On-airport
Operating Expenses

US RAC Fleet Costs

US RAC Off-airport
strategy

US RAC Non-Fleet
CapEx

European OpEx &

SG&A

HERTZ

HERC ROIC

Hertz
Hertz Company
Company Overview
Overview
CCM
CCM
Deal
Deal Structure
Structure

Conclusion
Conclusion

The Hertz
Corporation
Domestic
Subsidiaries

HERC

Hertz Vehicle
Financing

Hertz
International

OpCo

FleetCo

OpCo owns rest of Hertzs assets

Conducts all rental transactions with
customers
Leases fleet from FleetCo and
provides equity for FleetCo

Bankruptcy remote special purpose

entities provide optimized
securitization for asset backed debt
financing
Leasing rates from OpCo cover
debt payments

Stability

Hertz should be able to survive a severe business

downturn without need to restructure or default

Flexibility

Capital structure should enable Hertz to make large

car purchases and manage fluctuations in the rental
activity

Liquidity

Hertz should be able to exploit future growth

opportunities without having to refinance

Lower
Costs

Funds should be obtained at significantly lower cost

than current capital

Hertz
Hertz Company
Company Overview
Overview
CCM
CCM
Deal
Deal Structure
Structure

Conclusion
Conclusion

 PE-groups

bid around $13.8 bln for

Hertz
Ford
CCM

asks for a revised bid

are considering whether $15

bln are still a fair price...

Lower
WACC
More
Revenues
Less
Costs

CCM already pushed capital structure and leverage

to the limit
Significantly lower WACC is very unrealistic
Projections already include revenue growth forecast
No rational reason for Hertz to outperform the
market
Revenue growth above market highly speculative
CCM included conservative cost cutting projections
Still quite some leeway for further improvements
Most realistic value driver

Timing of RAC and equipment rental are businesses with short

cash cycles
Cash
Thus timing of cash flows is no lever for value
Flows

 We

think...

...that a valuation of $15 bln can be

justified.
...CCM should go ahead with the deal.

History

proves us right...

 In

November 2006, the three firms opted

for an IPO at the price of USD15 Per
Share.
Post IPO, the three firms had a combined
holding of 72% Equity in the Company.
In July 2007, the company went for
another round of IPO which left them
with a 55% holding.
Today the share trades at USD 21.52 and
has a market Capitalization of USD10.02
Billion. The PE Ratio is 28.84.

Thank you for

your attention!
Any questions?