Dollar Thrifty investors raise stakes, seek richer bid

* Co gets new top shareholder in Senator Investment

* Dollar Thrifty trading volumes rise 6 percent

* Second biggest shareholder becomes active investor

By A.Ananthalakshmi

BANGALORE, May 4 (BestGrowthStock) – Dollar Thrifty (DTG.N: )
investors, disappointed with a Hertz takeover bid that they
think offers too small a premium, have been building stakes in
the company as they gear up to oppose the deal.

Regulatory filings show the company has a new top
shareholder, and at least one passive stakeholder has become
active and has refused to accept Hertz’s current offer.

Last week, Hertz (HTZ.N: ) said it would buy Dollar Thrifty
for $1.2 billion, or $41 a share, offering a premium of just
5.5 percent to shareholders. [ID:nSGE63P03V]

Shares of the company have risen almost 31 percent since
Hertz’s offer, valuing the company at $1.45 billion.

About 8.2 million Dollar Thrifty shares have changed hands
since the announcement, according to Reuters data. This is
about six times the 1.4 million shares traded the week before
the deal was announced.

The company has about 28.6 million shares outstanding.
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For a Dealtalk, click on [ID:nSGE63T0J6]
For a related Breakingviews column, click on [ID:nLDE6431RC]
For a graphic on current market share, click
http://link.reuters.com/zed62k
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An ownership filing with the Securities and Exchange
Commission shows Senator Investment Group has acquired a 7.9
percent interest in Dollar Thrifty since the Hertz
announcement.

This move makes it Dollar Thrifty’s biggest shareholder,
eclipsing T. Rowe Price, whish has a 6.02 percent stake made it
the top shareholder as of Dec 31, 2009.

Senator Investment said it may hold discussions with Dollar
Thrifty management regarding “selling all or a portion of the
company and evaluating the relative attractiveness for
shareholders of any such offers.”

It bought 2.25 million shares for a total of $95.7 million;
all these shares were acquired since April 26, when Hertz
offered to buy Dollar Thrifty.

On Monday, rival Avis Budget (CAR.N: ) said it might make a
“significantly” higher bid. [ID:nSGE6420H6]

To comply with the merger agreement with Hertz, Dollar
Thrifty has agreed not to look for alternative bids.

Dollar Thrifty shareholders have expressed their
disappointment with the 5.5 percent premium offered by Hertz.

“This looks like you’re paying something along the lines of
three times pro forma EBITDA for Dollar Thrifty, which seems
like a complete steal,” Citadel Investment Group analyst J.J.
Berney told Hertz executives in a recent conference call.

The offer valued the company at about 16 times forward
earnings. Avis Budget and Hertz trade at multiples of 17.1 and
23.3 times, respectively.

Citadel owns shares of both Hertz and Dollar Thrifty and is
the fourth-biggest shareholder of Dollar Thrifty.

“We own both so we’re happy today. We would just rather be
happier,” Berney said.

Hedge fund PAR Capital Management expressed similar views,
saying Hertz’s proposal was “woefully” inadequate.

It increased its stake in the company to the current 6.2
percent, up from its 5.06 percent as of March 17. The 6.2
percent stake makes it the second-biggest shareholder of Dollar
Thrifty.

“We should be entitled to a larger premium based on the
earnings of the company,” PAR’s portfolio manager Paul Reeder
told Reuters. “Dollar Thrifty shareholders should be entitled
to some portion of the synergies of the two companies
combined.”

The Hertz deal is 80 percent in cash and 20 percent in
stock.

“It just strikes me that it’s unfair that so much value
that is created by this combination should occur to Hertz
shareholders relative to Dollar Thrifty shareholders,” said
Reeder.

In the filing, PAR Capital said it would vote its 1.8
million shares against Hertz’s current offer if a shareholder
vote were held now.

There is also the question of a big shareholder overlap,
about 66 to 67 percent, between Hertz and Dollar Thrifty.

“I think it’s a conflict of interest for a lot of people
because if you own both then you have less concern about them
potentially underpaying for Dollar Thrifty assets,” said PAR
Capital’s Reeder.

Penny Stocks

(Editing by Mike Miller and Saumyadeb Chakrabarty)

Dollar Thrifty investors raise stakes, seek richer bid