(Reuters) - Hertz Global Holdings Inc (>> Hertz Global Holdings, Inc.) said it would spin off its equipment rental business, aiming to raise $2.5 billion (£1.5 billion) to repay debt and focus on its car rental business.

Hertz, the No. 2 U.S. car rental company behind privately owned Enterprise Rent-A-Car, has been under pressure from investors to shed the business, which rents equipment ranging from small tools to heavy earth movers.

Hertz shares rose 2 percent before the bell on Tuesday.

The company put in place a poison pill in December to ward off any takeover attempts at a time when activist investors such as Daniel Loeb's Third Point Capital were picking up stakes in the company.

Hertz said on Tuesday the proceeds would be also used to fund a new $1 billion share repurchase program.

The company said it expects the separation, which will be through a tax-free distribution to shareholders, to close by early 2015.

Hertz's remaining businesses would include the Hertz, Dollar, Thrifty and Firefly car rental brands.

The equipment rental business, Hertz Equipment Rental Corp, generated revenue of over $1.5 billion in 2013, accounting for about 14 percent of the company's total revenue of $10.77 billion.

The company said fourth-quarter adjusted net profit fell 13 percent to $121.1 million due to lower-than-expected rental prices and higher expenses.

Revenue rose 10.2 percent to $2.56 billion.

BofA Merrill Lynch and Barclays were financial advisers to Hertz for the spinoff. Jenner & Block LLP and Debevoise & Plimpton LLP provided legal counsel, while KPMG was tax adviser.

Hertz shares closed 5 percent higher at $27.22 on the New York Stock Exchange on Monday.

(Reporting by Mridhula Raghavan and Ankit Ajmera in Bangalore; Editing by Sriraj Kalluvila)

Stocks treated in this article : Hertz Global Holdings, Inc., Expedia Inc