Ford yesterday announced plans to float Hertz, the world’s biggest car rental company, in a deal which is expected to value the business at up to $3bn. The offering of up to 20 per cent of Hertz could raise as much as $600m for Ford and will mark the end of the US car giant’s ownership of all of the business.
Ford made its first investment in the company in 1987 and acquired full control three years ago. But in January Ford said it was reviewing its strategic options for Hertz, including a partial sale.The announcement compounds a period of remarkable turbulence in the US car rental sector, which has seen a string of transactions involving four of the top players. In January Ford sold its other rental holding, Budget, to Team Rental of Florida for $350m.Ford refused to comment yesterday on whether it would consider disposing of the remainder of Hertz at a later date. The initial public offering (IPO), which will be handled for Ford by JP Morgan, will involve the issuing of new shares of Hertz common stock and will represent just under 20 per cent of the company.Regardless of Ford’s long-term strategy, the immediate hope is for a boost to Hertz shares. Last year, Ford sold off a similar slice of its Associates First Capital Corp also in a public offering, in return for which it saw a jump in the unit’s share price from $29 to over $40.”Investor interest in the rental car industry has increased dramatically,” Ford’s vice-chairman, Ed Hagenlocker, said yesterday. “We believe that it is now in the best interest of our shareholders to consider an initial public offering of Hertz.”It will be some weeks before the offer will be priced.

The handling of the IPO represents a victory for JP Morgan, which snatched the business from Ford’s traditional Wall Street bank, Goldman Sachs.The other recent rental transactions have included the sale of the US Avis fleet to Team Rental of Florida in a deal last year. Meanwhile, the rapidly expanding Republic Industries, led by Wayne Huizenga, has recently purchased both the Alamo and National Car Rental operations.The shake-up in ownerships is expected to trigger a fresh attempt by the industry to raise rental prices. Renting a car remains one of the more remarkable bargains for travellers in America, surpassed only by the price of a burger on the road.. United Utilities yesterday became the latest British water company to run into trouble overseas after disclosing that it is facing a loss of up to pounds 90m on a sewage project in the Thai capital of Bangkok. The group, which owns North West Water and Norweb, said it was taking an pounds 83m provision in this year’s accounts after encountering further delays and problems on the pounds 150m contract begun in 1993.
United Utilities had already taken a pounds 7m charge against the contract in its 1994/95 results after the scale of the potential losses began to emerge. The provisions are equivalent to a third of last year’s annual pre-tax profits of pounds 272m.

The shares fell 6p to 667.5pThe company insisted yesterday, however, it had a strong case for recovering the additional costs and it intended to pursue its claims vigorously.A spokesman said the delays and additional costs had resulted from changes in the specification of the contract to build a sewage treatment works and network in the Thai capital and the failure of the client, Bangkok Metropolitan Administration, to provide proper site access.Changes in government regulations had also limited the contractors to working only four hours a day in certain areas of the city and then only if the work was carried out at night and did not cause noise.Negotiations over the cost and time overruns with the Governor of Bangkok and the central government had been progressing favourably as late as December.However, the Governor informed United Utilities last month that its claims were no longer valid, meaning the dispute will have to go to arbitration. United Utilities has since pulled out of international construction activities, in common with other water companies which have suffered heavy losses, notably Thames Water which took a pounds 100m charge last year.. Magnus Grimond

Alun Cathcart, the chairman and chief executive of Avis Europe, is set to receive his second pounds 2m windfall in the space of a decade from the flotation of Europe’s largest car hire operator.
Yesterday the group announced the 108p to 126p a share price range for the group’s stock market offering, its second in just over 10 years, which will value Avis at up to pounds 734m, making it the biggest public offer this year.Mr Cathcart made pounds 2.2m before tax from the group’s original stock market debut in 1986 and subsequent highly geared pounds 900m sale in 1989 to a group that included D’Ieteren, Belgium’s leading car importer, and General Motors.The latest float will see him convert options into shares worth pounds 2.37m at the 117p mid-range price. He is selling 60 per cent of his stake, which would raise pounds 1.42m at the mid-price, mostly to cover tax liabilities, and is locked into the remaining holding for 12 months. In all, 62 managers will end up with a stake worth between pounds 6.3m and pounds 7.3m as a result of the conversion of options granted at the equivalent of 1p each.Mr Cathcart promised yesterday he would not be coming back to the market a third time. “I can guarantee, after the last four weeks, I have done my last Avis flotation. That I can guarantee,” he said yesterday.Ten per cent of the offer, which will raise a net pounds 237m at the mid-price, will be reserved for individual investors, who will be entitled to membership of the Avis Europe Founders’ Club.

This will make them eligible for perks such as free extra days on Avis rentals, a hot line to automatic reservations and discounts on hire rates.Individuals will have to apply for their shares through intermediaries such as banks, stockbrokers and four share shops. But Mr Cathcart said UK retail demand was running at “very high levels”. The retail offer closes on 21 March, with trading due to begin on 4 April.Avis is estimating that operating profits rose a fifth to pounds 101m in the 12 months to the end of last month. Merrill Lynch, one of the brokers to the issue, is forecasting that profits will rise from pounds 56.8m to pounds 89.7m at the pre-tax level in the year to next February, putting a p/e ratio of between 12 and 13.5 on the indicative pricing range.. John Willcock

Capital Corporation, the casino group defending itself against a pounds 191m hostile takeover bid from the London Clubs International (LCI), is postponing next Tuesday’s scheduled announcement of 1996 results until the bidder produces a formal offer document.
“We intend to publish our defence document with our results, and we have 14 days to prepare the defence from the time we receive LCI’s offer document,” a Capital spokesman said yesterday.The spokesman said that there had been “a deafening silence” from LCI since it launched its 47-for-100 all-shares bid 11 days ago.