The largest publicly traded U.S. rental-car company,
Hertz Global Holdings, Inc.
) had adopted a one-year shareholder right plan to prevent
activist investors from completely taking it over. The decision
to adopt a shareholder right plan - also known as poison pill -
came after the company realized certain unusual and substantial
options activity in its shares.
As per the plan, the company is entitled to issue one
preferred share purchase right for each outstanding common stock
after the close of business on Jan 9, 2014. The rights will be
exercisable only when a person or group acquires 10% of the
company's common stock. However, for institutional investors, the
exercisable limit is 15%.
The poison pill reduces chances of gaining control over a
company by any person or group through accumulation of shares in
the open market without appropriately compensating
Hertz expects the above plan to facilitate in increasing
shareholder value through on the execution of strategic
initiatives. The company's long-term strategic initiatives
include the integration of Dollar Thrifty, expansion Hertz's
off-airport footprint, introduction of new brands according to
consumer needs, roll-out of new rental technology and the
company's Lean cost management programs. Apart from this, Hertz
is considering a revision in its operating structure and capital
allocation to drive long-term growth.
The news generated positive sentiment among investors, which
was reflected in the stock's price on the following day. Shares
of Hertz reached a new 52-week high of $28.90 on the last trading
day of 2013 before closing trade at $28.62, approximately 10.5%
higher than the previous day's closing price. In 2013, Hertz
shares rose over 70% primarily driven by its improving prospects
while its peer,
Avis Budget Group, Inc.
) shares surged 95%.
Furthermore, we believe that the recent momentum in the
company's share price benefited from a rebound in leisure and
business travels owing to recovery in the U.S. economy and
increased spending by individuals.
However, at present, this leading airport car rental brand in
the U.S. with presence at 120 major airports in Europe holds a
Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the
same industry include
SouFun Holdings Ltd.
While SouFun has a Zacks Rank #1 (Strong Buy), Core-Mark carries
a Zacks Rank #2 (Buy).
AVIS BUDGET GRP (CAR): Free Stock Analysis
CORE-MARK HLDG (CORE): Free Stock Analysis
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
SOUFUN HLDG-ADR (SFUN): Free Stock Analysis
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