Car hire company Hertz is waiting to see if shareholders in the Dollar Thrifty Group will approve a takeover today.
If Dollar investors decide the deal offered by Hertz is not good enough, it is likely Hertz will walk away from the negotiating table. This will clear the way for rival car rental firm Avis to step in. Avis has said that if Hertz is no longer involved in a possible deal, it will include a break-up fee in its offer.
A break-up fee, or reverse termination fee, is an agreed amount of money to be paid by the buyer to the target company if all conditions of the deal are met but the deal does not go through. Avis has always stipulated that any deal it offers whilst Hertz is in the running will not contain such a clause. If Hertz walks, Avis says it will offer a break-up fee of $20 million.
In its offer for Dollar Thrifty, Hertz included a reverse termination fee of $44.6 million. In all, Hertz has offered Dollar a deal worth around $1.5 billion in cash and shares. Since Hertz offered to buy Dollar thrifty in April, offers and counter offers from both Hertz and Avis have been flying across the table.
Earlier in the month, Hertz agreed to a deal worth just over $50 per share. Although Avis is willing to offer more, the Dollar board has chosen to stick by Hertz as it believes competition regulators will not approve a merger with Avis.
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