AutoNation says it might sell or spin off car rental lines

Internet-based marketer to focus on sales, shed National Car, Alamo

August 03, 1999|By BLOOMBERG NEWS

FORT LAUDERDALE, Fla. -- AutoNation Inc., the largest U.S. car retailer, said yesterday that it may sell or spin off its auto rental unit as Chairman H. Wayne Huizenga struggles to boost its lagging shares.

President and Chief Operating Officer John H. Costello resigned after seven months in the job to pursue online ventures. The stock has fallen 28 percent in 52 weeks, and the plan to shed the unit that includes National Car Rental and Alamo Rent-A-Car advanced the shares just 31.25 cents, to $15.25, in trading yesterday.

Huizenga and Steven Berrard, co-chief executive, have built AutoNation from a trash-hauling company since 1995 by acquiring automobile dealers, eventually expanding to selling new and used cars online. Still, investor enthusiasm waned with used-car losses and more Internet-based competition, leading Huizenga to announce in June that he will replace Berrard this year.

The company, which changed its name from Republic Industries Inc. in April, said it will buy back as many as $500 million more common shares. AutoNation, with a market value of $7 billion, repurchased $449 million in stock through June 30. It has more than 450 company-owned and franchised stores across the United States.

Selling, spinning off or otherwise shedding the unit would make "AutoNation a pure-play automotive retailer, enabling the investment community to better recognize and evaluate the strengths and growth prospects of our automotive retail operations," Huizenga said.

The company's car rental unit, which also includes CarTemps USA, generated $1.68 billion, or about one-third, of the company's second-quarter revenue of $5.07 billion. Morgan Stanley Dean Witter & Co. analyst Susan Quilty valued the car rental unit at $1.3 billion to $1.9 billion in a report yesterday.

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