Republic Industries to buy Alamo Rent-A-Car in Fla. $625 million deal will help buyer's used-car firm

November 08, 1996|By BLOOMBERG BUSINESS NEWS

FORT LAUDERDALE, Fla. -- Republic Industries Inc. will buy Alamo Rent-A-Car Inc. for about $625 million in stock, gaining a source of vehicles for Chairman H. Wayne Huizenga's chain of used-car super stores.

Republic outbid an earlier offer of less than $500 million from HFS Inc., analysts said.

The move comes two months after the collapse of Republic's $4 billion offer for security company ADT Ltd., which owns the second-largest auto auction company.

Alamo, the nation's No. 4 car rental company, will give Republic's AutoNation USA a leg up on its main rival, Circuit City Stores Inc.'s CarMax used car stores. With Alamo, AutoNation will be able to buy cars in bulk, while other used car companies must buy their cars at smaller dealer auctions.

"Alamo solves many of the problems that people had with AutoNation by increasing its access to cars," said Jordan Hymowitz, an analyst with Montgomery Securities.

Republic shares climbed $2.875, nearly 10 percent, to $33.875 yesterday in trading of 3.7 million, more than triple its three-month daily average. Earlier, the shares hit a record high of 34.50.

Analysts expect Republic to issue about 20 million shares to pay for Alamo.

Republic agreed earlier this year to buy AutoNation from an investment group led by Huizenga for stock valued then at $250 million. Appreciation in Republic's share price drove the value of the transaction up to more than $400 million. The acquisition is expected to close next month.

Alamo is the latest twist in Huizenga's year-and-a-half-long quest to build a service-oriented business with interests in home security, trash collection, billboard advertising and car sales.

Alamo caters to the leisure market and has a stable of vehicles with high resale value, such as General Motors Corp.'s Suburban and Tahoe sport-utility vehicles. The popular models are sure to find a ready market on AutoNation USA lots, the analyst said.

AutoNation recently opened a no-haggle outlet in South Florida, the first of what Huizenga predicts will be 80 stores across the country in three years. The billionaire has said he expects each location to generate $100 million in annual sales.

"The accessibility of a low-cost fleet supply, as well as a guaranteed destination for the vehicle is very important," said Neil Abrams, a rental-car industry consultant.

Pub Date: 11/08/96

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