Hertz (HTZ) is at it again. The company has named John Tague as new CEO following accounting errors and pressure by activist Carl Icahn. More specifically, the company last week announced that it would restate 2012 and 2013 financial results, following an ongoing review. The Company now doesn’t plan to file updated financials before Mid-2015 which will delay the company’s planned spinoff. Hertz also disclosed that it is pursuing a cost-cutting plan that will result in $100mm in savings by the end of the year. Additionally, Jana Partners also recently upped its stake to more than 38mm shares (8.3% stake). Source
In JANA’s Q3 letter to investors, the hedge fund stated:
Hertz Global Holdings (HTZ) – Hertz is a leader in a consolidated industry that we believe has substantial unrealized pricing power. We have been following HTZ and the transformation of the car rental industry over the last three years. Against a backdrop of healthy industry fundamentals, HTZ has been plagued recently by fleet mismanagement problems and an accounting restatement. The dreadful share price performance of HTZ relative to its peers has fostered a shareholder rebellion that led to the ouster of CEO Mark Frissora and important changes to the HTZ board. What HTZ needs now is new leadership – a CEO who can reposition and right size the fleet, take the lead on improving pricing, resolve the accounting problems, reinvigorate the troops, and complete the spin-off of Hertz Equipment Rental (HERC). It is a tall order, and we believe Scott Thompson is just the right guy to do it. We have known Scott for years. His track record at Dollar Thrifty Group was exceptional. He is a car rental guy who knows the ins and outs of the
industry, is passionate about the opportunity at HTZ and is highly regarded in the investor
community. We have met privately with the board and have written publicly to them to express our enthusiastic support for Scott Thompson. With the right CEO at the helm – be it Scott or an equally qualified leader – and the appropriate strategy and capital allocation plans in place, we believe HTZ is capable of generating nearly $3.00/share of free cash flow. This combined with an estimated value for HERC of roughly $6.00 per share, suggests that HTZ is trading at a very deep discount to intrinsic value.
8-K with restated financial statements:
