SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTON 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 25, 1999
(Date of Report)
AVIS RENT A CAR, INC.
(Exact Name Of Registrant As Specified In Its Charter)
DELAWARE 1-13315 11-3347585
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
900 Old Country Road
Garden City, NY 11530
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516)222-3000
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable
ITEM 2. ACQUISITON OR DISPOSTION OF ASSETS.
Not applicable
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable
ITEM 5. OTHER EVENTS.
On May 24, 1999, Avis Rent A Car, Inc. announced that it has
signed an agreement to acquire Cendant Corporation's [NYSE:CD]
PHH and Wright Express vehicle management and fuel card
businesses for $1.8 billion. The transaction, which is
expected to close on or about June 30, 1999, will be funded
through a combination of debt and preferred stock,
consisting of approximately $1 billion in banking facilities,
$500 million in high yield securities and $360 million in
convertible preferred stock.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
Reference is made to the News Release of Avis Rent A Car, Inc.
filed as an Exhibit hereto, which information is incorporated
herein by reference.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AVIS RENT A CAR, INC.
(Registrant)
Date: May 25, 1999 By:
----------------------------
Kevin M. Sheehan
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
News Release of Avis Rent A Car, Inc. dated May 24, 1999
AVIS BUYS INDUSTRY-LEADING FLEET MANAGEMENT
AND FUEL CARD BUSINESSES FROM CENDANT IN TRANSACTION
VALUED AT $1.8 BILLION
Transaction Enables Avis to Diversify both the
Revenue and Geographical Base of the Company
Creates Strong Growth Opportunities for Avis, PHH and Wright Express,
Including Cross-Selling to Each Company's Extensive Corporate
Customer Bases
Fleet Management Businesses Leverage Avis Strengths
In Financing and Managing Large Automotive Fleets
Garden City, New York, May 24, 1999 - Avis Rent A Car, Inc. [NYSE: AVI] today
announced that it will acquire Cendant Corporation's [NYSE: CD] PHH and Wright
Express vehicle management and fuel card businesses. The acquisition represents
a transforming event for Avis to diversify its current car rental business,
expand its revenue base, create powerful new synergies, and bring together a
senior management team that has a wealth of fleet management and financing
experience. The transaction will extend Avis' global reach through PHH's
extensive European operations.
PHH is a leading global vehicle management company. The company provides
services to over 19,000 companies in North America and Europe, including nearly
one-third of the Fortune 500 companies and 50% of the FTSE 100. A substantial
portion of PHH's revenues is generated by its fee-based fuel and credit card
business. The company's total automotive fleet exceeds 700,000 vehicles
worldwide; each year it purchases approximately 140,000 new vehicles and sells
approximately 140,000 used vehicles. The company employs over 2,500 people
worldwide. Wright Express provides fuel management services to commercial
customers and develops and manages private label and cobranded fleet card
programs. PHH and Wright Express will remain separate, each independently
reporting directly into Avis.
The transaction is valued at $1.8 billion. It will be funded through a
combination of debt and preferred stock, consisting of approximately $1 billion
in banking facilities, $500 million in high yield securities, and $360 million
in convertible preferred stock. The transaction, which comes as a result of an
auction process among several bidders, is expected to close on or about June 30.
Although immediately accretive in cash earnings per share, Avis estimates that
the transaction will be slightly dilutive to GAAP earnings per share in 1999,
slightly accretive in 2000, and significantly accretive beginning in 2001.
Kevin M. Sheehan, Executive Vice President and Chief Financial Officer of Avis
said, "PHH and Avis are a natural fit, since both companies principally serve
corporate clients and there are a number of opportunities to cross-market to
each other's customers and to better capitalize on existing clients. That
includes leveraging to PHH's benefit the strong relationships Avis enjoys with
thousands of smaller, more profitable corporate customers - relationships which
take enormous time to build. Importantly, we also expect that PHH's information
technology applications will enhance the car rental business.
"It's also important to note that, building on our core strengths in managing
large automotive fleets, the acquisition of this complementary business expands
our business base and provides Avis with strong, annuity-like revenue and profit
growth - giving us both fee-based and asset-based revenues," Mr. Sheehan said.
F. Robert Salerno, President and Chief Operating Officer of Avis said, "We
intend to have PHH and Wright Express continue operating as distinct entities,
with their management teams remaining in place. They have built successful,
streamlined operations, and we look forward to their continued leadership. Their
contributions will bring Avis closer to our vision of becoming the world's
leading provider of full service automotive transportation and vehicle
management solutions."
Mark Miller, President and CEO of PHH said, "We are creating a company that will
be extremely competitive across a broad front. The unique strengths of each
company will enable us to serve a wide range of commercial customers with
innovative value added services. The team at Avis has done an extraordinary job
growing their business and delivering shareholder value, and we are excited to
be joining them in that effort."
Stephen P. Holmes, Vice Chairman of Cendant said, "In addition to the clear
advantages for Avis, this transaction provides a three-fold benefit to Cendant.
It helps to complete our strategic realignment, it provides the benefits of the
purchase price, and it enables us to continue to participate in the upside
potential of the fleet management and car rental businesses through a larger
equity interest in Avis."
<PAGE>
PHH Information Technology Expertise to Benefit Car Rental Business
Mr. Salerno explained that PHH's powerful information technology applications
have substantial potential to benefit Avis' car rental operations. "These
systems provide corporate fleet customers with web-based data analysis on a
car-by-car basis virtually in real time, which is a tremendous cost control
tool. This capability helps build great customer loyalty for PHH, and we believe
these applications will have real value for Avis' commercial customers," he
said.
Avis estimates that PHH's advanced information technology applications will
accelerate its IT strategy by as much as three years. These applications
represent powerful cost management tools that will be valuable to Avis'
corporate rental customers.
PHH Subsidiaries to Help Bring New Market Reach to Avis
In addition to the core PHH business unit and Wright Express, Avis is acquiring
two PHH subsidiaries, Cendant Business Answers (Europe) PLC and the Harpur Group
Ltd., which Avis believes will help extend its market reach and grow both the
fleet management and car rental businesses:
o Cendant Business Answers (Europe) PLC includes: PHH Vehicle Management, the
UK's leading vehicle management specialist; Cendant Claims Plus, which
provides accident management on behalf of major insurers and corporate
businesses; and Cendant Business Partners, specialists in transaction
processing and technology.
o The Harpur Group Ltd. is a leading fuel card and vehicle management company
in the United Kingdom, and includes brands such as Overdrive Business
Solutions, one of the UK's leading providers of specialist automotive
business solutions. The PHH and Harpur businesses have over 1.2 million
cards in use in the UK market. Wright Express adds an additional 2 million
cards, giving the company a combined reach of 3.2 million cards.
Terms of Preferred Stock Outlined
Avis will finance a portion of the purchase price by issuing $360 million of
Series A preferred stock. This will need to be ratified by shareholders at Avis'
annual meeting in 2000. According to the agreement, the terms of the preferred
stock are as follows:
The preferred stock will have an eleven-year term with a five percent dividend
rate. For the first five years the dividend will be paid-in-kind; for the
remaining six years it will be paid in cash. Cendant has a put option on the
preferred after two years, and it is callable under certain terms by Avis after
five years. The stock is convertible into common shares at a price of $50 per
share, a 41% premium to Avis' share price at the close of business on Friday,
May 21, 1999. Following the conversion, Cendant will receive an additional 7.2
million Avis shares, increasing its stake in Avis to 34%. Cendant's voting
shares are capped, however, at 20%. The non-voting shares would convert into
voting shares if Cendant ever sells them to a third-party.
Lehman Brothers is serving as financial advisor. Chase Manhattan Corporation and
Lehman Brothers are providing financing to Avis for this acquisition.
This press release contains statements related to future results, which are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks and uncertainties, including the impact of competitive
products and pricing, changing market conditions, the ability of the Company and
its vendors to complete the necessary actions to achieve a Year 2000 conversion
for its computer systems and applications: and other risks which are detailed
from time to time in the Company's publicly-filed documents, including its
Annual Report on Form 10-K for the year ended December 31, 1998 and the
quarterly report in Form 10-Q for the period ended March 31, 1999. Actual
results may differ materially from those projected. These forward-looking
statements represent the Company's judgements as of the date of this release.
Avis Rent A Car, Inc. with locations in the United States, Canada, Australia,
New Zealand, Argentina, Puerto Rico, and the U.S. Virgin Islands, is one of the
leading car rental companies in the world. Annually, the Company completes
approximately 15 million rental transactions with a fleet averaging
approximately 205,000 vehicles, generating over $2.3 billion in revenue.
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CONTACTS:
Tony Fuller
Media Relations
516/222-4690
Elizabeth Logler
Investor Relations
516/222-4795
