Sloan Sessions: Hertz IPO

Scott Jagow Nov 6, 2006

Sloan Sessions: Hertz IPO

Scott Jagow Nov 6, 2006


SCOTT JAGOW: The world’s largest car rental company will become a publicly-traded company this month. Hertz plans to sell its shares for about $17 dollars a piece. That should raise around $1.8 billion, one of the biggest IPOs of the year. And Newsweek’s Allan Sloan says let’s not forget about Wall Street’s take.

ALLAN SLOAN: Last December, three private equity firms bought Hertz from Ford Motor Company. Now they’re taking it public. Assuming this thing comes out at $17 a share, the investors will have made 340 percent on their money in 11 months, which is not a bad return before fees. Wall Street will have made, call it, $1.1 billion in fees for doing all this and my favorite part is there’s going to be a new song they’ll be singing on Wall Street when they cash their bonus checks. Do you know what it is?


SLOAN:“Love Hurts.”

JAGOW: Boooo. Alright well this happens every day on Wall Street doesn’t it? We have big deals where companies go private or go public, Wall Street makes a ton of money in fees. What’s so special about this one?

SLOAN: The big deal here is how quickly it is and how much money it is and that it’s a household name, and finally it’s not as if the seller is a bunch of idiots. I mean Ford Motor Company knows something about the auto business, knows something about the rental business and when they sold this thing last December the whole transaction valued Hertz at a little under $15 billion and now it’s being valued at $18 billion and change.

JAGOW: Well what does Ford think about all this?

SLOAN: Well they told me, they gave the only rational answer which is, ‘we put the thing up for bids, there were bids, we evaluated the bids, this is what it was worth, we got fair value and we sold it.’ Also to some extent the world has changed for the better for rental companies because the whole stock market’s up since December and airline travel is up and airline travel is one of the big things that determines the business that car rental companies do.

JAGOW: Well is there a reason that Hertz wants to go public?

SLOAN: The reason this company is going public is that the private equity firms see a chance to make money. I mean that’s all it is, this is not a mysterious thing. This is a question of is there more money to be made taking Hertz public now and selling off the pieces over years or do you wait? Believe me, if they couldn’t take it public at a price they found happy, let’s say they could only take it public at $11 a share, they probably wouldn’t do it.

JAGOW: Well I guess we’ll see if the shareholders “love Hertz.”

SLOAN: Or maybe they’ll be singing the other song “Hurts So Good.”

JAGOW: Let’s get off the air. Thanks Allan.

SLOAN: A wise move, you’re welcome, Scott.”

JAGOW: Allan Sloan’s the Wall Street editor for Newsweek Magazine. In Los Angeles, I’m Scott Jagow. Thanks for tuning in. Enjoy your Monday.

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