Boston, MA 03/19/2014 (wallstreetpr) – The ability to tap trending business and adapt accordingly is a critical corporate asset that helps identify and capture the real growth potential and Hertz Global Holdings, Inc. (NYSE:HTZ) has finally developed that ability. After 7 long years of consolidated operations the company seems to have rightly learned its lesson and has decided to keep the lease business away from rentals. The spin-off will deliver two separately listed companies that are competitively poised to manage their respective business profitably.
Spec of Spin Off
The spin-off is tax-free and will result in a $2.5 billion cash inflow to pay the debt capital of the combined entity and support the liquidity lay-off needed for the repurchase of a $1 billion buyback plan, which replaces another $300 million buyback plan it announced last year. The new plan will execute in trenches most of which will execute after the spin-off is completed by around financial year 2015. Total repurchased stock will constitute around 20% of the outstanding shares.
Highlights of Financial Impacts Trickling from the Spin Off
The implications of such a spin off are simple. Both the entities will continue their respective business lines with a greater focus and a stronger financial backbone. The more profitable car rental business will free up the capital unnecessarily tied-up in backhoes & bulldozer rental business, thus enhancing the car rental’s return on equity. Even though the control of both entities will remain in the hands of the same stakeholders, there will be greater transparency as to the performance of both business units.
What Caused the Restructuring Agreement
An “unusual and substantial stock activity” plan; a so-called “poison pill”, instigated the decision to spin-off and it was not the result of any takeover threat or proposed bid, Hertz Global Holdings, Inc. (NYSE:HTZ)’s official statement revealed.
