Shares of global logistics provider UTi Worldwide Inc. rose and fell sharply in a two-session span after a news report last night said the company was in advanced talks to sell itself to Danish logistics company DSV A/S.
Both companies spent part of last night tamping down speculation of a buyout, which was reported on Bloomberg News after the market closed. Bloomberg cited unidentified sources. In separate statements, UTI and Copenhagen-based DSV said they had held "exploratory conversations," but that the talks never progressed beyond the preliminary stage. There are no discussions being held at this time, the companies said.
Shares of Long Beach, Calif.-based UTi rose by $2.34 in trading yesterday to close at $13.88 a share. However, shares fell about $1.50 a share at today's opening after both companies dampened speculation of a buyout.
UTi has struggled this year due to a slowing global economy, a subpar airfreight market, and costs associated with rolling out its 1view IT system for freight forwarding services. In its fiscal 2015 second quarter that ended July 31, UTi reported a 3.4-percent year-over-year drop in gross revenues. Net revenues—revenues minus purchased transportation expenses—rose 4 percent year-over-year. The company is scheduled to release its fiscal 2015 third quarter results Dec. 9.
UTi's prospects have brightened in recent months as the rollout of the 1view system has largely been completed and global airfreight activity has picked up. The International Air Transport Association (IATA), the global airline trade group, yesterday reported that global freight traffic, measured in freight ton-kilometers, in October rose 5.4 percent over year-earlier levels. Traffic in October rose 0.7 percent over September's totals, continuing what IATA said was strong momentum in airfreight demand.
David G. Ross, transport analyst for Stifel, Nicolaus & Co., said in a note today that UTi presents itself as a solid takeover candidate, calling it "an attractive asset" for any company looking to establish a global presence in freight forwarding, contract logistics, or a combination of both. Ross said UTi is a "top-15" forwarder with its footprint in the U.S. and links from the U.S. to major markets. It also has a strong profit potential now that much of its IT development and implementation costs are behind it and airfreight demand and pricing trends are turning upward.