Management Joins Buyout of Budget Rent a Car

Budget Rent a Car’s management made another U-turn Monday, announcing that it would join a leveraged buyout firm and Ford Motor in moving the car rental company into private ownership for the second time in a little more than two years.

Gibbons, Green, van Amerongen, a leveraged buyout firm based in New York and Los Angeles, has formed a holding company with Budget’s management and the group will pay $333 million for the world’s third-largest car rental firm, Budget said.

Ford, which already owns 60% of Hertz, the world’s largest car rental company, is providing most of the money for the deal by buying non-voting shares in the new holding company, Beech Holdings Corp.

In August, 1986, Budget’s top management and Gibbons, Green bought Budget for $205 million from Transamerica, then sold 28% of the car-rental firm’s stock to the public on the over-the-counter market in May, 1987. A limited partnership run by Gibbons, Green held on to the rest of Detroit-based Budget’s shares.

In the complicated transaction announced Monday, Beech Holdings will in effect use mostly Ford’s money to pay $30 a share for all the shares held by the limited partnership and by the public.

Budget also announced that it has signed a long-term supply contract to continue buying the bulk of its cars from Ford.

For many years, Budget has used mostly cars from Ford’s Lincoln-Mercury division, Budget spokeswoman Jody Wilson said.

Ford officials were not available for comment Monday. “The people who were involved in it were working all night and aren’t around today,” spokesman Tom Foote said.

The antitrust division of the Justice Department had no immediate comment on the deal, spokesman Mark T. Sheehan said.

Budget’s shares rose $10.12 on Monday to close at $27.25 in very heavy over-the-counter trading of 495,600 shares.

Investing in the car rental industry makes sense in two ways for auto makers, analysts said. First, the rental companies place the largest single orders for cars--a total of about 650,000 vehicles in the United States last year, said Edward J. Bobit, editor and publisher of Automotive Fleet, a Redondo Beach-based trade magazine.

Altogether, about 10.3 million cars were sold last year in this country, with about 6.5 million of them built by Detroit’s Big Three auto makers.

Supplying rental cars is also seen as good advertising.

“If you’re introducing new models, it’s a great way to get people to try a new car,” said Daryl R. Leehaug, a group vice president at Duff & Phelps, a Chicago-based credit rating and investment research firm.

“I’m surprised that some of the other auto makers didn’t jump on . . . (Budget),” said Thomas F. O’Grady, president of Integrated Automotive Resources, an industry research firm in Wayne, Pa.

In his autobiography, Chrysler Chairman Lee A. Iacocca wrote: “The rental companies drive a hard bargain but, especially for Chrysler, it’s essential to be represented in their fleets.”

Chrysler sold about 150,000 cars to rental agencies last year, including 50,000 to Budget and its licensees, spokesman Tom Houston said. Both he and Budget’s Wilson declined to speculate on how Monday’s announcements would affect Budget’s future car purchases.