OWINGS MILLS, Md. –- Rent-A-Wreck of America, Inc. entered into an agreement in late January to merge with MBFG, Inc., a wholly owned subsidiary of JJF Management Services.
JJF Management, better known as Fitzgerald Automotive Group, created MBFG for the sole purpose of purchasing Rent-A-Wreck. Rent-A-Wreck will be the surviving corporation, while MBFG will hold all shares of the auto rental company’s stock.
The purchase comes just months after a deal fell through between Rent-A-Wreck and San Diego Car Rentals. As of late November, the two companies were even looking to reorganize senior management for the deal. As close as it was, though, the result was an "unconsummated merger," according to Jason Manelli, Rent-A-Wreck’s director of communications.
Following the unconsummated merger, now-former CEO Ken Blum Sr. led the effort to find a new buyer for Rent-A-Wreck, Manelli says. Blum Sr. stayed on until the sale was complete and the company structure changed.
"There’s no longer a board of directors for Rent-A-Wreck. We’re now a private company," Manelli says. "The board voted to sell back the shares of Rent-A-Wreck stock, and there was a common shareholders meeting, as well. Once the authorization to sell the company was given by the board, the company was put up for sale and prospects were vetted."
"I think we’ve ended up finding a really great buyer for the company," he adds.
Primarily operating dealerships, the buyer – ultimately being Fitzgerald Automotive – has already established a presence in the car rental business, particularly in the Washington, D.C. area. It currently owns and operates 10 Budget Rent A Car franchises, as well as 14 of its own NextCar car and truck rental brand. Rent-A-Wreck, however, will do business independently of JJF’s other holdings.
Manelli, speaking on behalf of the company, feels that Fitzgerald Automotive’s experience in the auto industry is a plus.
"Obviously, long legs in the business, with over 50 years experience, it’s a good group of car people to be behind," he says.
In addition, the business model under which Rent-A-Wreck will be functioning is also attractive to the company.
As owner-operators of the newly acquired Rent-A-Wreck, Fitzgerald does not act as investor in the company. In the past, however, that’s how the rental company had been managed.
"Investors have to take into account staying profitable, showing profit to shareholders and being accountable for shareholders," Manelli emphasizes. "As owner-operators, the Fitzgerald Group will have a return on this investment that they’ve laid out for the company, only if our franchisees show growth. And franchisee revenue translates into corporate revenue."
"It’s no longer tied to the share price of the stock," he continues. "It becomes more of a strictly car rental business."
The outcome is doing business for the sake of doing business, rather than doing business for the sake of investors, he says.
Of those investors, common stockholders will receive 40 cents a share for their stock. Those that own preferred stock will receive 88 cents a share.
At press time, Rent-A-Wreck was in sight of being able to sell franchises again, likely by mid-February. But Fitzgerald is examining and looking to grow the company’s training and support staff. In addition, it is moving Rent-A-Wreck from its current headquarters in Owings Mills, Md., suburb of Baltimore, to Laurel, Md., a suburb of Washington, D.C.
Manelli says the transition will likely be completed by the end of March or beginning of April.
With Fitzgerald's acquisition of Rent-A-Wreck of America, it becomes sole owner of the franchisor of 300 Rent-A-Wreck locations. Each location is independently owned and operated, with franchisees maintaining proprietorship of their individual fleets. Those fleets add up to about 9,000 vehicles operating under the brand name. Also included in the purchase was sister company Pricele$$ Rent-A-Car, a division of Rent-A-Wreck with about 70 U.S. locations.