Two giants of the rental car industry were poised to merge late on Sunday, as Hertz Global Holdings closed in on a deal estimated at $2.5 billion for the Dollar Thrifty Automotive Group, according to people briefed on the matter.
An agreement would cap a multiyear pursuit by Hertz, one that has survived a rival bid by the Avis Budget Group and a rejection by Dollar Thrifty shareholders of an earlier, lower offer.
Under the terms of the proposed transaction, Hertz will pay $87.50 a share in cash through a tender offer for Dollar Thrifty stock, one of these people said. That represents roughly a 7.5 percent premium to Dollar Thrifty's closing price on Friday.
In an important component of the deal, Hertz plans to announce that it will sell its Advantage discount-rental unit to Franchise Services of North America, a car rental franchisor, and Macquarie Capital, according to the people briefed on the matter.
Directors for both companies were scheduled to vote on the proposal by Sunday evening, the people briefed on the matter said. A deal could be announced soon afterward. These people cautioned that the agreements had not yet been finalized and that talks could still fall apart.
Representatives for Hertz, Dollar Thrifty, Franchise Services and Macquarie declined to comment or were not immediately available for comment.
Should it be completed, the deal would be the latest wtihin the car rental industry, which has experienced rapid consolidation in recent years. Dollar Thrifty, based in Tulsa, Okla., is widely seen as one of the few remaining attractive acquisition targets left.
A former division of Chrysler that was spun off in 1997, Dollar Thrifty was nearly forced into insolvency in 2008. Since then, however, it has posted three straight years of rising annual profits, earning $159.6 million last year alone.
Hertz was for many years owned by Ford, which spun the unit off in a 2005 initial public o ffering. That same year Hertz was acquired by a private equity consortium led by the Carlyle Group. In 2006, Carlyle again took Hertz public.
The prospective deal between Hertz and Dollar Thrifty has been more than two years in the making, mired in discussions over price and uncertainty over the companies' ability to win antitrust approval of a transaction. But both companies now believe that, with a concrete plan to sell Advantage, a deal would be blessed by the Federal Trade Commission.
Such is their level of confidence that no break-up fees are payable if the transaction fails, people briefed on the matter said.
Hertz first made a move to buy Dollar Thrifty more than two years ago for about $1.2 billion, or about $41 a share. The bid drew Avis Budget into the race, setting off heated competition.
Dollar Thrifty shareholders rejected Hertz's first offer in September 2010, despite a sweetening of the price, in the face of significantly higher proposa ls by Avis Budget. But antitrust concerns were largely seen as a bigger problem for Avis Budget: Analysts viewed the company's discount offerings as much bigger than Hertz's and harder to divest to win antitrust approval.
Last June, Avis Budget instead agreed to buy its European arm for about $1 billion, a decision largely interpreted as a sign that the company had walked away from Dollar Thrifty.
And Hertz, despite having offered $2.2 billion last May, also struggled to allay antitrust concerns. It withdrew its offer last October, but maintained that it was still interested in pursuing a takeover of Dollar Thrifty - pending F.T.C. approval.
The two companies kept in touch since then, however, slowly making progress on both price and a solution for their antitrust problems, these people said.
