COPENHAGEN (Reuters) - Danish transport and logistics group DSV (DSV.CO) is buying UTi Worldwide UTIW.O in a deal that values the U.S.-based rival at $1.35 billion, saying the deal offered to give it greater global reach as well as opportunities for synergies and cost savings.
Shares in DSV, which had held abortive takeover talks with UTi last year, rose as much as 6.7 percent to a record 270.4 Danish crowns. UTi stock had dropped 66 percent since the collapse of the previous deal talks.
DSV’s offer, which has been accepted by UTi, is $7.10 in cash per each UTi share, a premium of about 50 percent to the target’s closing price on Oct. 8, and a premium of around 34 percent to the 30-day volume-weighted average closing price.
“The price is actually relatively cheap for such a large bloc of business,” said analyst Frans Hoyer at Jyske Bank, noting it was pitched at 0.34 times the company’s last full-year reported sales of $3.9 billion.
DSV, founded by 10 truckers in 1976, has long said it wanted to growth its business and a consolidation of the fragmented industry was needed. It said the deal was expected to increase DSV’s annual revenue by approximately 50 percent, creating one of the world’s strongest transport and logistics networks.
“We complement each other perfectly, both in terms of business activities and geography,” DSV Chairman Kurt Larsen said. UTi Chairman Roger MacFarlane said he strongly recommended shareholders accept the offer.
But analysts also noted UTi’s recent performance as a challenge for DSV. The company on Sept. 3 reported a bigger than expected second-quarter loss of $0.70 per share and a 16.5 percent drop in revenue to $913.9 million.
“There is a big potential in this for DSV but there is also great risk,” analyst Jacob Pedersen at Sydbank said. “UTI is not making any money today, so DSV really needs to get the big broom out and clean up in the company”.
DSV said the transaction is conditional on approval of the UTi shareholders, the largest of which are funds controlled by P2 Capital Partners LLC, holding approximately 10.8 percent of the shares. P2 has already come out in favor of the deal.
Deutsche Post-controlled DHL Logistics is the world’s largest player in the sector, followed by Swiss-based Kuehne & Nagel KNIN.VX, Germany’s DB Schenker and U.S.-based C. H. Robinson.
Danske Bank (DANSKE.CO), ING ING.AS and Nordea NDA.ST have committed to financing the transaction.
UTi said Morgan Stanley (MS.N) was its financial advisor on the deal, with Cravath, Swaine & Moore serving as legal advisor.
Editing by Pravin Char and David Holmes