DSV Buys UTi in $1.35 Billion as Maxim Sees Possible Rival Bid

  • DSV dropped plans to buy UTi last year after shares jumped
  • UTI's stock had lost 61% this year as profit forecast cut

DSV A/S agreed to buy UTi Worldwide Inc. in a transaction that implies an enterprise value of $1.35 billion as the Danish logistics company seeks to expand in the U.S. air and sea freight market.

Industry history suggests that the bid may not be the final offer, Maxim Group strategist Justin Lumiere said Friday by e-mail after the announcement. UTi’s shares extended their gains late in the day, rising 51 percent to $7.13 and topping DSV’s $7.10-a-share offer.

DSV said its proposal represents a premium of about 50 percent to UTi’s Oct. 8 closing price. The stock rose 7.2 percent, the most since 2009, to 270 kroner at the close in Copenhagen. DSV will help finance the takeover by selling 5 billion kroner ($760 million) of new shares over 12 months. Danske Bank, ING and Nordea Bank will help finance the deal, DSV said.

“It’s a very interesting takeover with a good geographic match for DSV,” Jacob Pedersen, an analyst at Sydbank, said by phone. “It’s good news for DSV.”

DSV initially dropped takeover plans with UTi in December after a Bloomberg News report revealing it had been in talks caused UTi shares to spike, reaching $14.75 on Dec. 3. This year, UTi has lost 61 percent of its market value after the Long Beach, California-based firm slashed its profit forecast.

“DSV is good at buying companies with problems and turning their profits around,” Pedersen said. “But UTi will probably be the least well-performing major target in DSV’s takeover history, so this will also represent a big challenge.”

UTi on Sept. 3 cut its 2016 profit forecast for the second time in six months after earlier in the year announcing job and cost cuts, accelerating a year-to-date plunge of 61 percent through Thursday.

A competing offer for the company can’t be ruled out, Maxim’s Lumiere said. He cited the acquisition of EGL Inc. by a unit of what is now known as Apollo Global Management LLC. Apollo prevailed in a bidding war in 2007 with EGL founder James Crane, who was also the freight forwarder’s largest shareholder.

DSV Chief Executive Officer Jens Bjoern Andersen had signaled this year he’s seeking large takeovers after focusing on small and medium-sized targets during the financial crisis. The Hedehusene, Denmark-based company, which has bought 30 rivals in the past decade, has used the purchases to become Europe’s third-largest trucking company.

The two companies had combined sales of $13 billion in 2014 and will have 44,000 employees in 84 countries. DSV said it expects UTi’s profit margin to improve so that, in the “long term,” the combined entity will deliver the same margins as the Danish company.

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