UPDATE 1-Hertz cuts costs, boosts cashflow -investor letter

* CD&R sees opportunities, may do a deal in 2009 - letter

* Hertz cutting costs, generating cashflow

* Sally Beauty (SBH.N) outperforming in retail
(Updates to clarify cashflow range paragraph 12)

By Megan Davies

NEW YORK, April 9 (Reuters) - Rental car company Hertz
Global (HTZ.N) expects to further cut costs and boost cashflow
in 2009, and sees opportunities for acquisitions, according to a
letter from private equity firm Clayton, Dubilier & Rice, a
large shareholder of Hertz.

The letter, obtained by Reuters, gave highlights of a March
19 conference call that CD&R held with investors.

Hertz was taken private by CD&R, Carlyle and Merrill Lynch
Global Private Equity in 2005, then relisted in 2006. CD&R still
holds a stake in the firm.

Private equity firms routinely update investors on their
progress, but those communications are not made available to the
public. The CD&R letter gives updates on its portfolio and says
the firm sees opportunities ahead for deals.

Other buyout firms such as Blackstone Group (BX.N), Kohlberg
Kravis Roberts & Co [KKR.UL], Carlyle Group [CYL.UL] and
Texas-based TPG have recently updated investors with their own
year-end numbers.

CD&R declined comment on the letter.

In a section on Hertz, citing CD&R operating partner George
Tamke, the letter said it is focusing on cost actions and
cashflow initiatives at the car rental firm.

Hertz has been Hit by slow demand, and in February said the
uncertain economic environment prevented it from giving specific
quarterly or even full-year forecasts. It reported at the time a
quarterly loss, and said that it hoped to achieve $350 million
in additional cost savings in 2009.

According to the investor letter, cost and expense
reductions at the car rental firm for 2008 and 2009 are expected
to total a cumulative $600 million.

More details given on the call, but not included in the
letter, indicated that there would be further improvement in
cashflow in 2009 and that given current conditions Hertz could
generate an additional total net cashflow of around $500
million, a source familiar with the call said.

The letter said that in 2009, additional cashflow of $1
billion could be expected. The source familiar with the call
said that figure was based on whether the company reduced the
size of its fleet amid economic volatility.

That means the additional total net cashflow is expected to
be in a range of $500 million to $1 billion, the source said.

Hertz's performance against competitors continues to be much
better from a margin point of view and there could be
opportunities for it to look for profitable acquisitions, the
letter said.

The call was made prior to Hertz winning the bankruptcy
auction for the assets of Advantage Rent-A-Car and buying a
power generation company in Spain.

Beauty products retailer and distributor Sally Beauty
(SBH.N), another CD&R investment, is outperforming the retail
environment, the letter said, citing CD&R operating partner Jim
Berges.

It has seen a significant increase in same-store traffic for
the first time in about five years, has $375 million of
liquidity and no near-term refinancing requirements, the letter
said.

Sally Beauty in February posted a smaller-than-expected
first-quarter profit, as consumer cutbacks during the holidays
took a toll on the company's sales.

CD&R's letter said its most challenging portfolio company is
construction and industrial supplier HD Supply [HDSPY.UL], where
it has been cutting jobs and costs.

The private equity firm as a whole sees more opportunities
ahead for deals, and said it could complete a transaction in
2009 while the prospects for investments in 2010 and 2011 look
even better. Private equity firms have done few deals since the
credit crisis diminished the availability of leverage.
(Reporting by Megan Davies; Editing by Gary Hill and Matthew
Lewis)