Investors See Freight Firm’s Sale as Good Move

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Investors swarmed shares of Long Beach freight-forwarder UTi Worldwide Inc. last week after rumors surfaced it was negotiating a deal to sell itself to Denmark trucking company DSV A/S.

Bloomberg News first reported the companies were negotiating a deal Wednesday before the stock market closed, propelling shares up $2.34, or 20 percent, on the day. For the week ended Dec. 3, its stock had soared 18 percent to close at $13.88, placing the company among the biggest gainers on the LABJ Stock Index. (See page 28.)

UTi rejected the rumors in a statement released after trading Wednesday, and the next day, Bloomberg reported that UTi and DSV put a halt to their negotiations.

“Although UTi can confirm that exploratory conversations have taken place between the companies, in response to an inquiry from DSV A/S, those discussions never progressed beyond a preliminary stage,” the company said in a statement. “Currently there are no discussions taking place between the companies.”

Even if an acquisition isn’t imminent, the news gave investors a glimmer of hope for an eventual sale, said Kevin Sterling, analyst at BB&T Capital Markets in Winston-Salem, N.C.

“Investors got excited because, finally, something good is happening after so many years,” Sterling said. “I wouldn’t say investors are confident, but instead hopeful of a sale.”

UTi has been on a rollercoaster ever since it announced a multiyear plan to upgrade its IT system six years ago. The plan was to link a variety of systems that often lacked synergy, but the freight-forwarder’s plans to develop an integrated platform has cost tens of millions of dollars and still isn’t complete.

The technological difficulties during the installation process forced frequent delays, prompting some clients to cut ties with UTi. On top of that, the company was unable to collect from clients it managed to keep.

“Given the challenges they’ve encountered with their IT conversions, I think UTi remaining independent may not be the best course of action,” Sterling said. “A sale would probably be best.”

Despite the apparent cooling of the UTi-DSV courtship, Sterling believes a sale is inevitable.

“If they’ve had preliminary discussions with DSV, they’ve probably had preliminary discussions with other companies,” he said.

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