Hedge Fund Standoff
In December 2013, Hertz adopted a poison pill citing unusual trading in the company's shares, leading to speculation that hedge fund investors might take a stake in the company and call for change. For years, analysts had argued Hertz was sitting on too much cash and too little debt and that the company should spin its equipment rental business.
While no activist investor formally took on Hertz, the company decided in March to spin its equipment rental business in a move the company said would generate $2.5 billion in cash could be used to pay down the company's debt and support a $1 billion share repurchase. That buyback would equate to roughly 20% of Hertz's outstanding shares.
The company's targeted net debt ratio of 2.5-to-3.5 times earnings before interest, taxes, depreciation and amortization (EBITDA) post an equipment rental spin also indicated further capital returns were possible. Now, however, the buyback and equipment rental spin may be delayed as a result of Hertz's looming accounting restatement.
Bloomberg compilations SEC filings shows that Fir Tree Management, Glenview Capital Management, York Capital Management, SAB Capital Management and Third Point Management all held over 1% stakes in Hertz total outstanding shares as of the first quarter.
-- Written by Antoine Gara in New York.