Group:

Kultchitsky-Sigal A.
Shamanin V.
Moscow, NES Stepanenko D.
Serov P.
Key sources of extra value for CD&R in the LBO of Hertz
CD&R were convinced in Hertz’ brand, on-airport market leadership, and strong
historical performance. 2 main areas of extra value creation

Main areas Drivers

U.S. RAC on-airport operating expenses
U.S. RAC off-airport strategy
Operational efficiency
European operating and SG&A expenses
optimization
US RAC fleet costs
U.S. RAC nonfleet CapEx
Value creation
areas HERC focus on ROIC ratio

Financial efficiency Deal structure

optimization
Tax shield
Value of Hertz to CD&R in this transaction - Conservative
Conservative – 2.5bln

 Conservative
growth rate for both
RAC and HERC (4%)

 Exit multiplies was

used as pessimistic
one -6x
Value of Hertz to CD&R in this transaction - Conservative
Optimistic – 3.4 bln

 Conservative
growth rate for both
RAC and HERC (4%)

 Exit multiplies was

used as pessimistic
one -6x
Result

range between 2 457 – 3 480 mln $

all upside provide approximately 28,7% of value

Amount for CD&R to offer valuation - multiplies

Conservative approach 25% return/year - 2.5 bln

Optimistic approach 20% return/year - 3 bln

(!) Note: Terminal value – multiple approach, not perpetuity

Interpretation

 subtracted the long term debt in 2010

 offer should be about $3 billion to achieve a return of 20%
 overbid Bain-Blackstone-Lee-TPGoffer – 5.6 bln