"The actions announced today will create separate companies which we expect to benefit from improved financial profiles that include increased earnings stability and higher returns on capital," said Mark P. Frissora, Chairman and Chief Executive Officer of The Hertz Corporation. "Our rental car and equipment rental businesses are leaders in their respective markets with valuable assets and tremendous long-term potential. Through unbundling these undervalued assets, we unleash current and future shareholder value. In fact, we believe there is a potential for multiple expansion even if both businesses only trade in line with their peers. Additionally, the separation will help each business focus on its strategic and operational performance. With respect to capital allocation, our new leverage ratios may allow for incremental return of capital to our shareholders given the current credit environment."The Hertz board believes the planned separation of the equipment rental business from the car rental business would, among other things:
- Create a stronger growth profile and more competitive position for each company with enhanced management focus, resources and processes that are more directly aligned with each business's unique strategic priorities;
- Optimize the companies' capital structures based on the objectives of each independent company;
- Allow each business to attract and retain personnel by offering equity-linked compensation; and
- Create a more targeted investment opportunity with multiples and trading valuations that more accurately reflect the strengths and opportunities of each business.