The world's largest car rental company, Hertz Global Holdings, yesterday struck a deal to buy its smaller rival Dollar Thrifty Automotive Group for about $2.3 billion, ending a more than two years takeover battle with arch rival Avis Budget Group.

Park Ridge, New Jersey-based Hertz has offered to pay $87.50-a-share, a premium of 8 per cent to Dollar Thrifty's closing price of $81 on 24 August. The offer price is more than double the $41 per share that Hertz had offered in April 2010.

The deal is worth around $2.6 billion, but Hertz will pay around $2.3 billion since Dollar Thrifty has almost $300 million in cash in its balance sheet at the end of June.

"Hertz has made a compelling offer to our stockholders that reflect the strength of our business and our team. Hertz is the logical partner for us with the resources to expand our value focused leisure brands in key car rental markets around the world," said Scott Thompson, president, CEO and chairman of Dollar Thrifty.

"After three years of merger-related activity and speculation, I am pleased that we have reached a win-win transaction for both Hertz and Dollar Thrifty," he added.

Hertz has agreed to sell its smaller unit Advantage Rent A Car-a competitor to Dollar Thrifty, to Franchise Services of North America and Macquarie Capital, in order to gain regulatory approval for the acquisition.

Hertz has been chasing Dollar Thrifty since 26 April 2010 and offered to pay $1.17 billion in cash and stock, (See: Hertz Global to take over rival Dollar Thrifty in $1.17 billion deal) but shareholders rejected the deal and opted for a  $1.33 billion counterbid from Avis Budget Group Inc, the second largest US car rental company behind Hertz. (See: Avis outbids Hertz for Dollar Thrifty with $1.33 billion offer)

But since then both companies have raised their bids, but were stuck over price disagreements and regulatory hurdles.

The Hertz-Dollar Thrifty merger will create a global, multi-brand rental car leader with a full range of rental options for both corporate and leisure business in all three tiers of the car rental market.

The merger is expected to bring in cost savings of at least $160 million annually and would have enhanced leadership positions in key markets around the world, with combined sales of $10.2 billion.

Tulsa, Oklahoma-based Dollar Thrifty operates Dollar Rent A Car and Thrifty Car Rental brands in domestic leisure travel in virtually all of the top US and Canadian airport markets, as well as international travelers to the US under contracts with various international tour operators.

Dollar and Thrifty have approximately 280 corporate locations in the US and Canada, 1,300 franchise locations in 82 countries and approximately 5,900 employees located mainly in North America.