DSV buys UTi for $1.35 billion

DSV buys UTi for $1.35 billion

HONG KONG — Danish logistics company DSV will acquire loss-making UTi Worldwide for $1.35 billion in a surprise announcement that represents a 50 percent premium on UTi’s closing price yesterday.

UTi said it has entered into a definitive agreement to be acquired by DSV for $7.10 in cash per ordinary share and the transaction was unanimously approved by the respective boards.

Back in December both companies said no merger discussions were taking place, but UTi’s solid global and U.S. coverage was obviously too attractive for DSV to let slip.

Ed Feitzinger, chief executive officer of UTi, said the deal would strengthen the company’s value proposition to clients and deliver a healthy cash premium to shareholders. He said the client base and geographic footprint were complimentary.

“We have the opportunity to draw on the current strengths and scale of both companies to bring solutions to our clients that we could not have delivered on our own,” Feitzinger said in a statement.

“We believe that the $7.10 cash price to holders of our ordinary shares provided by this strategic combination is the best available outcome for ordinary shareholders while allowing us to develop with DSV a nimble, efficient, and comprehensive service offering for our clients.”

The two non-asset-based 3PLs provide a range of forwarding and other transportation and logistics services. DSV has been aggressively expanding by acquisition, last year taking over Ontime Logistics, SBS Worldwide, Airmar Cargo and Seatainers Group.

Analysts have regarded the Long Beach-based UTi as an attractive acquisition target with its strong forwarding and contract logistics base and U.S. presence. However, its financial results have been poor. The company lowered its earnings forecast for its current fiscal year as the company reported deeper second-quarter losses caused by declining ocean and air freight volume.

UTi posted a net loss of $70.7 million in the quarter ended July 31, compared with a loss of $19.2 million in the company’s fiscal second quarter a year ago. During the first half of the fiscal year, the net loss widened to $104 million from $65.6 million.

The company earlier forecast earnings before interest, taxes, depreciation and amortization to total $75 million to $100 million in its current fiscal year, compared with its previous projection of $125 million to $125 million.

Roger MacFarlane, chairman of the UTi board and a co-founder, said after careful consideration of strategic alternatives, the company believed the sale to DSV recognized the value of UTi's customer and supplier relationships, while providing holders of ordinary shares with a meaningful cash premium to the recent stock price.

Kurt K. Larsen, DSV chairman, said the acquisition would create a stronger company with a greater footprint in the 3PL space.

The acquisition is expected to be completed between Jan. 1 and March 31, and is subject to approval by UTi shareholders and the meeting of regulatory approvals.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.