Earlier this month, Danish logistics company DSV made an offer – its second in 12 months – to purchase U.S.-based UTi, which was agreed upon by both boards of directors, but not yet by shareholders. This week, financial analysts and many UTi investors are questioning whether UTi was undervalued.
The offer of US$1.35 billion, or $7.10 per share of UTi stock, represented a 50 percent premium relative to UTi’s closing price Oct. 8. A recent Wall Street Journal report said, however, that Sterling Capital Management was urging UTi shareholders not to settle for the deal. In a regulatory filing by Sterling on Oct. 21, Sterling said the value for the acquisition “does not reflect a reasonable private-market value for the business.” Sterling, which the WSJ called an “activist investor,” has a 3.3 percent stake in UTi.
“There have been a number of private transactions in the logistics space that reflect higher multiples on both EBITDA and sales that would suggest a significantly higher value for the issuer,” Sterling said.
Last week San Diego-based law firm Johnson and Weaver was investigating whether the deal represented adequate consideration, citing one Wall Street analyst who valued the stock at $14 per share. Three other law firms were also investigating whether UTi’s board is working in the best interests of the shareholders. Additionally, analysts set a target price of $13 per UTi share, $6 more than DSV’s offer. UTi’s shares traded at $10.25 per share as recently as June 24 this year.
The WSJ said UTi’s board has decided to entertain third-party interest. Shares in UTi are still down about 40 percent this year, despite a bump from the news of the potential deal, which put shares at $7.11 in early trading on Wednesday. DSV’s CEO Jens Bjorn Andersen has said he has no intention of raising the offer.
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