HFS Plans IPO for Avis Unit
HFS Inc. plans to sell a majority of Avis’ car rental business to the public rather than spin it off to HFS shareholders after the franchiser’s $800-million purchase of Avis Inc. is complete.
The plan, announced Friday, would not significantly change HFS’ strategy for Avis. HFS announced the purchase on July 1 and said then that it planned to divest Avis Rent A Car and retain the franchise, meaning the car-rental company would pay HFS a fee to use the Avis name.
HFS also announced Friday that it may pursue the acquisition of another car rental company, but it declined to name candidates.
“We expect meaningful opportunities to create shareholder value through the combination of HFS and Avis as well as the benefits associated with a potential follow-on acquisition in the rental car industry,” HFS Chairman and Chief Executive Henry R. Silverman said in a statement.
Parsippany, N.J.-based HFS is the world’s largest franchiser of hotels and residential real estate brokerage offices.
In its statement, HFS said it plans the initial public offering of Avis Rent A Car, together with the operations of the possible acquisition, sometime next year. Avis would be HFS’ biggest car rental franchise. HFS shares rose 75 cents to $62.50 on the New York Stock Exchange.
A spinoff would have put a smaller stake of the rental company in public hands and left HFS shareholders with both their HFS shares and shares of Avis Rent A Car. With the IPO, they receive no additional shares.
HFS said it has signed a definitive agreement with Avis and its employee stock ownership trust to move ahead with the purchase, and said it expects to execute a contract next week with General Motors Corp., which owns 29% of Avis, to purchase its shares.
The acquisition of Avis is expected to close in October, HFS said. Employee participants in Avis’ employee stock ownership plan, however, first must vote in its favor. Their vote is set for late September and HFS Chief Financial Officer Stephen P. Holmes said HFS is confident of approval.
