It's been nearly half a year since the rumors started flying that struggling automaker Ford
Well, happy day! As it turns out, a bidding war erupted over the past few months. According to CNN-Money, which cited the Wall Street Journal, a private equity alliance among Bain Capital, Blackstone Group, Texas Pacific Group, and Thomas H. Lee & Partners has lost out. Unless Ford changes its mind at the last moment and decides to go forward with a Hertz IPO, it appears that a rival private equity alliance, this one made up of Clayton Dubilier & Rice, Carlyle Group, and Merrill Lynch
Which totally changes my previous thinking on this deal. Again, back in May, the possibility that Ford might sell Hertz for the same valuation it had paid to acquire Hertz in its entirety back in 2001 didn't make its original purchase seem like a terribly good investment. But if Hertz can fetch a 60-70% premium -- well, that's a pretty decent rate of return over four years.
Mind you, this isn't the end to Ford's problems. Even under the most optimistic scenario, it would still leave the parent company with about $25 billion in cash, up against about six times as much debt. And it would complicate the servicing of that debt by excising from the Ford conglomerate one of its few profitable parts -- which contributed $365 million in profits last year.
But at least Ford's trying something to fix its problems (becoming third in line to sell a hybrid doesn't count). After too many years of sitting around, watching its market share erode, and offering little more than ever-increasing cash rebates as its sole creative idea, doing anything creative is a step in the right direction.
For more Foolishness on Ford's fortunes, click on:
- Ford: Too Late to the Party
- Click Here for Hybrids
- Ford Jumps on the Employee Discount Bandwagon With GM
Fool contributor Rich Smith does not own shares in any company named above.