Hertz announced that its board of directors has approved plans to separate into two independent, publicly traded companies, according to a press release on Tuesday.
The two companies will be "Hertz," which will include Hertz, Dollar, Thrifty, and Firefly rental car businesses in addition to Donlen, a vehicle leasing company, and "HERC, the Hertz Equipment Rental Corporation.
"The actions announced today will create separate companies which we expect to benefit from improved financial profiles that include increased earnings stability and higher returns on capital," Mark Frissora, Chairman and CEO at Hertz said in a statement.
The Hertz Board granted permission for the change to occur, which includes $2.5 billion that the company will use to reduce money owed, and initiate a share repurchase program with certain parts expected to be bought after the HERC dissolves away from Hertz the press release reported.
"Our rental car and equipment rental businesses are leaders in their respective markets with valuable assets and tremendous long-term potential. Through unbundling these undervalued assets, we unleash current and future shareholder value. In fact, we believe there is a potential for multiple expansion even if both businesses only trade in line with their peers," Frissora said in the statement. "Additionally, the separation will help each business focus on its strategic and operational performance. With respect to capital allocation, our new leverage ratios may allow for incremental return of capital to our shareholders given the current credit environment."
According to the press release, the Hertz board feels the new arrangement will give Hertz a leg up in the car rental business, and further improve its manager goals than they already are, make the business's capital structure the best it can become, and bringing in and keeping employees via pay associated with value.
Hertz will have 11,555 locations in the United States, Europe, Latin America, Asia, Australia, Africa, the Middle East, and New Zealand when the change is complete.
