Hertz rental sign (enjosmith / Flickr)
Jenner & Block and Debevoise & Plimpton have grabbed roles advising The Hertz Corporation on the company’s spinoff of its equipment rental business to shareholders in a transaction valued at $2.5 billion.
The car rental company announced the move Tuesday, promising to use proceeds from the tax-free spinoff to pay down debt and back a new $1 billion share buyback program that will take the place of a previously announced $300 million buyback. Hertz said Tuesday it had already used $87.5 million to repurchase its own shares under the previous program.
The transaction will create a new stand-alone public company called Hertz Equipment Rental Corporation that will operate about 335 branches in Canada, China, France, Saudi Arabia, Spain and the United States. The business rents industrial equipment such as air compressors, forklifts, power generators, trucks and trailers. The unit, which had total revenues of $1.5 billion last year, also includes an entertainment services division that rents lighting and aerial equipment used in the U.S. entertainment industry.
Park Ridge, N.J.–based Hertz will now turn its focus to its rental car and fleet leasing businesses, which generated $9.23 billion in revenue last year and include the Hertz, Dollar, Donlen, Firefly and Thrifty brands. Hertz also released its financials for last year’s fourth quarter on Tuesday and reported a 10.2 percent increase in revenue, to $2.6 billion, from the same quarter the previous year. That increase fell below analysts’ predictions, though, as Hertz blamed the “difficult fourth quarter” on lower-than-expected pricing and increased expenses.
The New York Times notes that Hertz—in the face of pressure from activist investors, including Carl Icahn and hedge fund manager Daniel Loeb— adopted a one-year shareholder rights plan, or poison pill, in December in order to avoid losing control of the company’s board of directors. Cravath, Swaine & Moore advised Hertz on its adoption of the poison pill after previously representing the company in connection with its 2012 purchase of Dollar Thrifty Automotive Group—the parent of the Dollar and Thrifty brands—for $2.3 billion.
Jenner & Block is serving as corporate and securities counsel to Hertz on Tuesday’s spin-off with a team led by M&A chair Thomas Monson, securities cochair William Tolbert Jr. and corporate partner Jeffrey Shuman. Hertz general counsel Jeffrey Zimmerman is a former Jenner litigation partner, and the firm has advised the company on various past matters, including its 2011 purchase of Donlen for $250 million.
Debevoise also advised Hertz on the Dollar Thrifty deal, which saw Hertz make several bids for the target over more than two years. Debevoise’s past work for Hertz also includes advising on the company’s $5.6 billion sale to three investment firms in 2005 as well as its subsequent 2006 initial public offering.
Debevoise is advising Hertz along with Jenner on the equipment unit spinoff with a team led by New York–based finance partner David Brittenham and tax partner Gary Friedman. Tax counsel Rafael Kariyev is also working on the matter.