Fighting for the Wheel

In 1971 it seemed simple. The Justice Department decided that a rash of acquisitions by ITT, the big conglomerate, did violence to the antitrust laws. Justice decreed that the firm could keep the Hartford Fire Insurance Co. and some smaller firms if it would divest itself of Avis, the nation's No. 2 car-rental firm, within three years. Since then the effort to sell off Avis has become bogged down in byzantine legal maneuvering that, if nothing else, sharply underscores the difficulties of pursuing a vigorous antitrust policy.

Last week Avis' status was cloudier than ever. Originally the trouble began because ITT failed to move fast enough to sell its stock; by 1974 it still held about half of the total. At the request of the Justice Department, a court then named a trustee, a New York lawyer named Richard Joyce Smith, and charged him with the responsibility of selling off the rest of the Avis stock. Smith, now 73, began to sound as attached to the stock as his predecessors; for a time he refused to sell any shares, arguing that the price was too low.

Public Sale. Then, two weeks ago, Smith filed a registration statement for the public sale of about 2 million Avis shares (25% of the total), which have a current market price of about $15 a share. He had already disclosed that he would use all of the 3.7 million shares he controlled to support amendments to the company charter that make tender offers all but impossible. One proposal would allow anyone holding more than 20% of Avis stock to veto a takeover. Even after the sale of the 2 million shares, Smith will hold 22% of the stock.

Fuqua Industries, an Atlanta-based conglomerate, offered to pay no less than $15.50 each for all of the Avis shares held by Smith, and agreed to make an equal or even better offer for the remainder of the stock held by the public. The Justice Department eagerly let it be known that it favored complete divestiture of the shares by the trustee as quickly as possible.

Smith rejected the Fuqua offer, arguing that stockholders would best be served by selling the shares from time to time on the public market. Indeed some Wall Street analysts agree that Fuqua's bid is low in view of Avis' strong earnings. Last year its profits climbed 55% over those of 1975, to $16.4 million, and earnings are expected to be at least as strong this year.

Fuqua executives and some Avis shareholders implied that Smith does not want to sell because of the fees he derives from the trusteeship. Over the past two years, they note, Smith has received fees of $100,000 from ITT. His law firm got $220,000 from ITT for various services involving Avis. In addition, Smith and one of his law partners have also been paid retainers of $6,000 a year as Avis directors, plus expenses for them and their wives to travel to meetings in Europe. Fuqua contends that Avis, the only major car-rental firm that is not a subsidiary of a larger corporation, would be strengthened by the merger.

Fuqua took its case to federal court in Hartford, requesting 1) that Smith be made to consider its offer, and 2) that Avis' annual meeting be postponed, to block Smith's efforts to ram through antitakeover amendments. The postponement request was rejected, but Fuqua was granted a hearing for the week of June 13 on an appeal to get Trustee Smith to reconsider its purchase offer. At the Avis annual meeting last week, Smith's antitakeover amendments were adopted. Fuqua executives believe they will eventually be permitted to acquire the company, but the trustbusters are gloomy. Almost six years after the divestiture order, it is unclear who will be in the driver's seat at Avis.

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