1. Ford sells Hertz to Carlyle and others
By Jeremy W. Peters in Detroit
September 14, 2005
Ford Motor has confirmed it will sell its Hertz rental car subsidiary to a group of private investors in a
deal valued at $US15 billion ($19.5 billion).
The sale is one of the largest ever to a group of equity firms and allows Ford to cash in on one of its
most valuable assets as it faces falling profits in its manufacturing operations.
Ford will receive $US5.6 billion in cash for Hertz, the largest car rental company in the US.
The sale will put Hertz, a company that has been owned by public corporations for much of its 87-
year history, under the control of three private equity investment firms: Clayton Dubilier & Rice, the
Carlyle Group, and Merrill Lynch Global Private Equity.
To finance the deal, the investors are using $US2.3 billion in cash and assuming the remaining
amount as debt.
"I think there's no doubt at the end of the day that this was a win-win-win transaction," said David
Wasserman, a partner at Clayton who negotiated the terms of the deal with Ford.
"It demonstrates the power of private equity in helping corporations restructure their balance
sheets."
The infusion of $US5.6 billion in cash comes at a time when Ford's cash reserves are shrinking.
At the end of the second quarter Ford reported $US21.8 billion in cash in its automotive operations,
down from $US22.9 billion in the first quarter.
Ford's chief financial officer, Don Leclair, said in a statement on Monday: "This transaction
reinforces our commitment to strengthening our balance sheet and investing in our core automotive
business."
Ford has been hurt this year by the rising cost of fuel, weak vehicle sales, and intense competition
from Asian car makers.
Its market share has slipped and it has warned Wall Street to expect smaller profits.
Ford began weighing a sale or spin-off of Hertz in April.
For now, the new owners said they do not plan any dramatic overhaul of operations at Hertz. Mr
Wasserman said on Monday that Hertz's senior management team would stay for the foreseeable
future.
"The management team is a very seasoned management team and we don't have any plans to
make any immediate changes."
Already, one Wall Street ratings agency was expressing doubts about the deal. Moody's Investors
Service said on Monday it was reviewing Hertz's debt for a possible downgrade into junk territory
because it was concerned the new owners would increase Hertz's debt load.
The new owners said they expect the transaction, which is subject to regulatory approval, to be
closed by the end of the year.