October 28, 2006
Hertz IPO
Posted by Lisa Fairfax

Echoing our discussions here regarding the connection between public and private markets, Hertz announced on Friday its intention to host a public offering that could raise about $1.8 billion. The amount nearly doubles the value for equity firms who acquired the company about 10 months ago, confirming Gordon's belief that private equity firms look to the IPO as an exit strategy. In this case, the exit was fairly quick. An interesting feature of the Hertz IPO is that investors are set to receive a special dividend of about $426 million depending on the deal pricing, and that amount could increase if the green shoe is exercised. Hence, the IPO will represent a huge payout for private investors.

However, the IPO is not the only method private investors used to recoup their investment. In fact, Hertz will use its IPO proceeds to pay off a $1 billion loan taken out by Hertz to pay dividends to private investors. According to some experts, these special dividend payments reflect one way that private investors are able to get their money back even before the IPO.

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