Cheap travel, particularly cheap auto rentals, may become a bit more difficult to come by as a result of an announcement on Monday that Hertz, the worlds biggest car rental company, is buying Dollar Thrifty Automotive Group for approximately $1.17 billion in cash and stock.
This purchase will give Hertz an additional 1,500 locations, increasing its total to 9,800. Hertzs European leisure rental business will be significantly enhanced.
Hertz believe that this deal will immediately improve its profits, stating that it has already identified a minimum of $180 million in cost cuts that can be achieved by combining the two companies.
Hertz reported that its first quarter U.S. rental car revenue rose 10 percent due to higher prices, increased business travel, and improved results of its Advantage leisure brand.
Profits in 2010 are projected to increase by 16 percent as a result of this purchase. An adjusted profit of 43 to 45 cents per share in 2010 is being forecasted by Hertz on $7.5 to $7.7 billion in projected revenue.
Whether this merger results in further increases in car rental prices in the U.S. remains to be seen.
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