Dollar Thrifty’s merger hits an operatic note…

There were times when passages in the merger proxy that Dollar Thrifty Automotive Group, Inc. (DTG) filed August 17 read more like a libretto than an SEC filing. The classic operatic themes are there: money, multiple suitors, commitment issues, and surprising plot twists.

In this particular drama, at least two suitors wooed Dollar Thrifty, including Hertz Global Holdings, Inc. (HTZ) and the Avis Budget Group, Inc. (CAR). The courtship unfolded over a few years, as the proxy’s “Background of the merger” section explains on pages 59 – 76.

Hertz and Dollar Thrifty announced on April 25, 2010 that they had agreed to combine their fates in a deal worth approximately $1.3 billion. If the merger goes through, Dollar Thrifty will be a wholly-owned subsidiary of Hertz.

Thank goodness there were no duels or bloodshed, but the suitor that lost — Avis — expressed its disappointment publicly. The proxy includes a letter from Ronald Nelson, the Chairman/CEO of Avis, which states:

——I was very surprised by your April 26 announcement that you had signed a definitive agreement to be acquired by Hertz—. This is particularly true given that, on April 19, a mere week before the Hertz announcement, Scott [Thompson, Thrifty’s CEO/President] and I agreed to meet for dinner on April 28 to discuss a transaction between our companies, which you cancelled after the Hertz announcement—.

—…This failure is all the more surprising given that, at the time you signed a definitive agreement to be acquired at virtually no premium, you clearly had knowledge that published earnings estimates for Dollar Thrifty were well below the updated guidance—

—Now that we and our advisors have had access to the terms of the merger agreement, we are astonished that you have compounded these shortcomings by agreeing to aggressive lock-up provisions,—

A subsequent reply from Dollar Thrifty’s Thompson to Avis’s Nelson began:

—Our Board of Directors has received and reviewed your letter of May 3, 2010. Needless to say, I was surprised to learn of its existence on CNBC before even receiving it. I was also disappointed to read its numerous factual inaccuracies.

When Thompson made the late-April merger announcement, he lauded the “greater resources and the technology” that a merger with Hertz would bring, adding: “We see the combination of our brands with Hertz’s brands as very compelling.

Also compelling, perhaps, is the post-merger money that will flow to Dollar Thrifty’s top executives and directors.

If the merger concludes on December 31, 2010, Thompson will receive more than $22.5 million from his severance, equity interests, benefits and accrued vacation. Thompson’s Employment Continuation Agreement also requires the company to pay a gross-up payment of $2,928,678. Although less, the other four NEOs will each get merger-related payments that range from more than $5.32 million to $9.3 million.

Severance in various circumstances could bring Thompson three times his salary, plus bonus and annual incentive (2-1/2 times for other executives), as well as benefits and other perks.

Dollar Thrifty’s directors aren—t left empty-handed, either. When the merger closes, their equity interests (including the grant of 3,560 RSUs that each of them received on January 27, 2010) will immediately vest. While the precise amount each director will get depends partly on the closing price for Hertz’s common stock on the date of the merger, it’s safe to say that they will receive hefty checks for their stakes in the company.

And then there’s this handy perk:

—Upon the completion of the merger, each director (including Mr. Thompson) will also be entitled to lifetime use of rental cars for product and service evaluations while traveling.

Shareholders will decide whether to accept or reject the merger at a special meeting on September 16, 2010.

Image source: fancycwabs via flickr


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