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Hertz heading for management shakeup?

Hertz (HTZ) is getting plenty of attention from big investors these days. Billionaire activist investor Carl Icahn disclosed yesterday in a regulatory filing that he owns an 8.5% stake, or 38.8 million shares in the company.

“The life of management is going to be made more miserable by the presence of Icahn,” said Yahoo Finance Senior Columnist Michael Santoli.

Icahn plans to pressure Hertz on accounting issues, operational failures and his lack of confidence in management. Also, in typical Icahn fashion, he expressed interest in gaining a seat on Hertz’s board. Hertz adopted a so-called "poison pill" last year, an action used to prevent any one shareholder from taking control of the company.

Hertz shares tumbled on Wednesday after the company said it expects its earnings for the year to be well below its previous guidance. The company cited operational challenges, including record-level vehicle recall activity and costs related to restating its financial statements for the last three years.  

Santoli said Icahn is not alone in expressing his dissatisfaction with how the company has been mismanaged.

"Hertz has been a hedge fund favorite for a while, and you have other investment managers who are also starting to kind of shake the cage of the CEO here, in saying this has been a mismanaged company," says Santoli. "It’s not a bad brand; it’s not a broken business; it’s a mismanaged company on an operational and accounting perspective, and they seemingly have not done a good job intergrading the Dollar Thrifty acquisition.

Hedge fund Fir Tree Partners, which owns about 3% of Hertz’s stock, is pushing the company’s board to replace CEO Mark Frissora

"The CEO has had some serious missteps, and it's time for a change," Scott Tagliarino, a spokesperson for Fir Tree Partners, told Bloomberg News. "We believe Hertz has an incredible brand and an opportunity to show leadership in the car rental industry. We look to work constructively with management and the board to address these issues."

Although investors are pushing for new management, Santoli said it doesn’t necessarily mean they are going to get that.

Hertz said in a statement that its board and management team “value the views of all Hertz shareholders and welcome a constructive dialogue with them.” The company also pointed out it is making progress on its accounting review and addressing its “recent challenges."

“We remain focused on the business and executing our operating initiatives... We have a good handle on the nature and scope of the issues in the business and are executing plans to resolve them.”

 

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