- The Washington Times - Monday, September 12, 2005

DETROIT (AP) — Ford Motor Co., aiming to focus more on building cars and trucks, said yesterday it will sell its Hertz Corp. rental-car business for $5.6 billion in cash.

The nation’s No. 2 automaker said it will sell all shares of common stock in Hertz, its wholly owned subsidiary, to a private equity group composed of the Carlyle Group of the District, Clayton Dubilier & Rice, and Merrill Lynch Global Private Equity in a deal valued at $15 billion, including debt.

Ford announced in April it was considering shedding Hertz, which it has owned since 1994, to concentrate on its core automotive business. The infusion of cash should help the automaker, which has been struggling with falling sport utility vehicle sales, growing U.S. health care costs and other issues. Ford’s second-quarter profit fell 19 percent to $946 million.

“This transaction reinforces our commitment to strengthening our balance sheet and investing in our core automotive business,” said Don Leclair, Ford’s chief financial officer.

The deal is subject to regulatory approvals and is expected to be completed by year’s end.

Hertz plans a cash tender offer for up to $2.3 billion of outstanding debt securities in connection with the transaction; certain other Hertz debt will be refinanced.

In addition, Ford Motor Credit Co., the automaker’s finance arm, said separately it intends to file a registration statement to exchange its own debt for up to $2.4 billion of outstanding Hertz debt with similar terms. Such an exchange could generate cash for Ford Motor Credit.

The transaction also involves another $4.7 billion in primarily other Hertz debt, a Ford spokeswoman said.

Burnham Securities analyst David Healy called the deal “a reasonable move” for Ford, which he said can certainly use the extra cash to enhance new product development and offset rising health care expenses.

“Hertz has become less and less important as an outlet for Ford cars as Ford has pared back sales to Hertz and other daily rental companies,” Mr. Healy said. “It’s really a non-core business right now.”

Still, Hertz is the world’s largest general-use car rental business. It has been a solid contributor to Ford’s bottom line, with revenue of $6.7 billion and net income of $365.5 million in 2004.


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