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SRS Investment Management Nominates Five Directors To Avis Board

SRS Investment Management, LLC ("SRS"), which owns a 31% economic interest and has been the largest stockholder of Avis Budget Group, Inc. (the "Company" or "Avis") (NASDAQ: CAR) for the past seven years, today announced that it has nominated five highly-qualified and motivated individuals for election as directors to the Avis Board at the Company's upcoming annual meeting.  

The nominees include two existing Avis Board members and three new nominees:

  • Matthew Espe
  • Carl Sparks
  • Brian Choi
  • Jagdeep Pahwa
  • Sanoke Viswanathan

This press release along with additional information on each of the nominees is available at www.driveavisforward.com.

SRS also issued the following statement:

"SRS's commitment to the long-term success of the Company is demonstrated not only by the length of our association with Avis but also by the extent of economic ownership that it has maintained during this time.  Currently, SRS owns a 31% economic interest in Avis through a combination of 12 million shares in stock (~15%) and economic exposure to an additional 13 million shares (~16%).  SRS's support for the Company has been unwavering despite significant share price volatility.  In fact, SRS is the only hedge fund that has remained the largest investor in any Fortune 500 company for the past seven years. 

Over the past two years, through its representation on the board, SRS has engaged more closely with the Avis management team and non-SRS representatives of the board ("Legacy Board").  Although this additional involvement has strengthened SRS's belief in the great long-term value of the business, it also has made clear that the Company cannot achieve its full potential under the stewardship of the current Legacy Board. 

In SRS's view, the Legacy Board suffers from a fundamental problem of entrenchment.  Of the 10 board members that are not SRS designees, three are former/current executives of Avis and six of the remaining seven have what ISS describes as compromisingly lengthy tenures of nine or more years.  The seventh board member is the chairman of another public company board where Ronald Nelson (the Executive Chairman of Avis) serves as the lead director.  This board composition clearly exemplifies lack of independent objectivity. 

For nearly a decade, no movement has been made to refresh the Legacy Board despite the substantial change occurring in the mobility industry.  The resulting unhealthy dynamic between the Legacy Board and the management team has created a culture of complacency resulting in weak operating performance and a neglect of the board's fiduciary duties to its stockholders.  Specific examples directly attributable to this failing are outlined below:

      • The Legacy Board has not held management accountable for its recurring failure to deliver on operating and financial targets.
      • The Legacy Board has taken no meaningful action to address the failure to satisfy the commitments it made to stockholders at Avis's 2016 Investor Day regarding the implementation of a ground-up plan to achieve higher EBITDA margins over a five-year period.
      • The Legacy Board has exhibited inaction and a startling lack of urgency throughout the entire search process for a permanent Chief Financial Officer.
      • The Legacy Board has displayed, in our view, poor corporate governance and a disregard of its fiduciary duty to maximize value for Avis stockholders on a number of occasions.

These failures can only be resolved by refreshing the board with a new Chairman and independent directors who will hold management accountable.  Furthermore, SRS believes the board needs the technology expertise required to navigate the rapidly evolving world of mobility.  Several of the key initiatives that the new board should focus on include: (1) agreeing on the top strategic priorities for the Company, (2) developing a medium term plan for accelerating EBITDA growth in the core business, (3) strengthening the management team specifically by hiring a world class CFO, (4) creating a performance and data-driven culture with a focus on meritocracy over tenure, and (5) aligning management compensation with performance targets and stockholder returns.

SRS remains a firm believer in Avis's long-term potential for value creation.  We believe the stock is worth significantly more than what is reflected in its current share price.  Avis has a truly global brand with 70 years of history and an excellent core business that generates significant cash flow.  Avis is a uniquely scarce asset that has the potential to play a critical role in the future mobility ecosystem.  However, in our opinion, what is lacking is the guidance and leadership from an independent board that is equipped to help the Company leverage its strengths to further improve its operating and financial metrics while making the necessary investments to take advantage of rapid technological changes. 

To address this critical shortcoming, SRS has assembled a slate of five directors comprising two existing directors and three new directors.  The two existing directors have served admirably as board members in the face of what we believe is structural entrenchment and group complacency.  The three new directors (two independent directors and one SRS representative) are all highly qualified and motivated nominees who will guide Avis to maximize value for Avis stockholders. We look forward to the support from Avis stockholders to drive Avis forward."