A group of investors that includes the District-based Carlyle Group said yesterday that it has agreed to buy Hertz Corp., the car rental company, from Ford Motor Co. for $15 billion in cash and debt.
The deal will provide a $5.6 billion cash infusion to the automaker, whose bonds were downgraded in May to junk status.
Carlyle's cash outlay of about $767 million would be its second-largest, after the $808.5 million in cash it put up in 2003 for the telephone directory business of Qwest Communications, Carlyle spokesman Christopher Ullman said.
Carlyle managing director Gregory S. Ledford said the investment firm sees growth potential in Hertz's overseas and heavy equipment rental businesses. The buyout firm viewed Hertz as a "corporate orphan" -- a well-run company with a good brand and a good business that is not central to its corporate parent's business, Ledford said. "We spend a lot of time looking for businesses like that," he said.
Ledford said he didn't believe rising crude oil and gasoline prices would have a big impact on Hertz, "unless it really impacts people flying," because Hertz's business is largely driven by airport traffic.
Ledford said Ford is selling because "they need cash," but a Ford spokeswoman put it differently.
"We've decided that it's not core to our strategic business plan," Ford's Becky Sanch said.
Ford in recent months had been preparing a public offering of Hertz stock but opted for the sale because it provided "a strong value in up-front cash proceeds," Sanch said.
Carlyle's partners in the deal are Merrill Lynch Global Private Equity and Clayton, Dubilier & Rice Inc., each of which is taking a one-third stake, Carlyle's Ullman said. Clayton, Dubilier & Rice partner George W. Tamke is to become chairman.