|The Hertz Corporation recently announced that it would soon spin off its equipment rental corporation. The separation is planned as a tax-free spinoff to Hertz shareholders and is expected to close by early 2015. It would result in net proceeds of an estimated $2.5 billion. The rental equipment company currently has 335 branches in Canada, the United States, Spain, France, Saudi Arabia and China. In 2013, the company had over $1.5 billion in annual revenue.
Hertz continues to expand its operations by renting out several different types of equipment, including tools and air compressors, material handling and forklifts, trailers and trucks, pumps, power generators, and earth-moving equipment.
Since early 2013, Hertz had discussed to separate its rental equipment department from the rest of its operations. In August, the company struck up conversations with the Internal Revenue Service to prepare for the transition.
The remaining company will consist of Firefly, Thrifty, Dollar and Hertz rental car businesses, along with the fleet management and leasing service provider Donlen.
Hertz noted that it would use the proceeds to support a share repurchase program and reduce debt. The company’s chief executive and chairman Mark P. Frissora stated that this would maximize value for both current and future shareholders. He noted that expansion was top of mind when discussing this transaction.
This move is not the only major announcement from Hertz in 2014. According to their executives, rental cars are not just for the airport anymore. Hertz has diversified by moving a significant number of its vehicles to locations where people are likely to need them: supermarkets, auto body repair shops, hotels, and retailers like Ikea and Costco.
In 2013, about half of the company’s rentals were for entertainment or leisure, while one-third of rentals served as vehicle replacement when the owner’s car required repairs or was otherwise unavailable.