Following the separation, Hertz will continue to be led by its existing Chairman and Chief Executive

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Shares of vehicle rental giant, Hertz Global Holdings Inc. ( HTZ - Snapshot Report ), witnessed carnival cruise packages a significant 7.7% rise in the pre-market trading session today as the company communicated the spin-off of its construction equipment rental business carnival cruise packages a short while ago. This news was earlier reported by Financial Times on Friday evening, triggering a 4.8% rise in the company s shares during Monday s trade.
The board at Hertz announced its decision to separate the company into two independent, carnival cruise packages publicly traded companies. The first company will retain Hertz s car rental businesses comprising Hertz, Dollar, Thrifty and Firefly as well as its fleet leasing services division called Donlen. The second company emerging from the separation will be named Hertz Equipment Rental Corporation or HERC and will comprise the company s equipment rental business.
The spin-off, which will be a tax-free transaction for Hertz shareholders, is expected to generate $2.5 billion proceeds for the company. Hertz plans to use the proceeds to lower debt and fund a newly approved $1 billion share buyback program. The share repurchase program, which will commence following the completion of the spin-off, will replace the company s existing $300 million buyback program.
The spin-off is expected to improve the financial profiles of both companies, ensuring stabilized earnings as well as higher returns on capital. Further, it will help improve management focus on each of the separated businesses, which enjoy a leading position in their respective markets.
Hertz as an independent car rental company (post spin-off) will operate from nearly 11,555 rental locations throughout North America, Europe, Latin America, Asia, Australia, carnival cruise packages Africa, the Middle East and New Zealand, marking carnival cruise packages the biggest car renting network across the globe.
Major points of focus for this car renting behemoth following the separation will include the smooth integration of Dollar Thrifty, growing its off-airport carnival cruise packages presence and efficient fleet management, promoting mobile services to meet customer requirements, further developing its Donlen carnival cruise packages leasing business, introducing new rental technology and efficiently managing costs through its Lean/Six Sigma programs.
Further, with an improved financial profile following the separation, the company targets a corporate leverage ratio of 2.5x to 3.5x net debt / EBITDA. Hertz s car rental and fleet leasing business generated annual revenues carnival cruise packages of $9.23 billion in fiscal 2013.
On the other hand, the newly formed HERC will be positioned as the world s leading and most diversified equipment leasing business. Operating through a network of 335 branches in the United States, Canada, France, Spain, China and Saudi Arabia, as well as through international franchisees, the company generated annual revenues of more than $1.5 billion in fiscal 2013. As a separate entity, HERC targets a leverage ratio of 3.5x to 4.0x net debt / EBITDA, with its capital allocation primarily focused on fleet investment to drive growth, acquisitions and debt reduction.
Following the separation, Hertz will continue to be led by its existing Chairman and Chief Executive Officer, Mark Frissora, while HERC will determine its board members and management carnival cruise packages positions once the separation is finalized.
Quoting a similar transaction, Sears Holdings Corp. ( SHLD - Analyst Report ) recently reached the final stages of its previously announced spin-off of Lands End. Slated to complete the spin-off on Apr 4, 2014, the company carnival cruise packages will be divided into two companies, Sears Holdings Corp., retaining the same ticker symbol and Lands End Inc. with a new ticker symbol LE .
Hertz currently holds a Zacks Rank #3 (Hold). Better-performing stocks in the business services industry include SouFun Holdings Ltd. ( SFUN - Snapshot Report ) and Rentrak Corporation ( RENT - Snapshot Report ). While SouFun Holdings carnival cruise packages has a Zacks Rank #1 (Strong Buy), Rentrak carries a Zacks Rank #2 (Buy).
One is a boring business delivering blistering growth. Another is a red-hot oil and gas producer set to surge on a drilling breakthrough. Still another, an online payment provider, ignited a 53% sales explosion during the past year.
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