NEW YORK (TheStreet) -- Shares of UTi Worldwide (UTIW) were gaining 47.6% to $6.97 on Friday following the announcement that Danish transport company DSV will acquire the Long Beach-CA based shipping company in a deal valued at about $1.35 billion.
DSV will buy all outstanding shares of UTi for $7.10 a share in cash under the acquisition agreement. The deal represents a 34% premium over UTi's 30-day weighted average trading price, and a 50% premium over its Thursday closing price.
The acquisition is expected to close between January 1, 2016 and March 31, 2016.
"For our clients and employees, the potential combination of our two businesses has a strong cultural fit, aligned strategy, and a complementary client base and geographic footprint," UTi CEO Ed Feitzinger said in a statement. "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."
About 39.1 million shares of UTi were traded by 9:34 a.m. Friday, well above the company's average trading volume of about 1.3 million shares a day.
TheStreet Ratings team rates UTI WORLDWIDE INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate UTI WORLDWIDE INC (UTIW) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Air Freight & Logistics industry. The net income has significantly decreased by 222.6% when compared to the same quarter one year ago, falling from -$21.93 million to -$70.73 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Air Freight & Logistics industry and the overall market, UTI WORLDWIDE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 55.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 191.66% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- UTI WORLDWIDE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, UTI WORLDWIDE INC reported poor results of -$2.10 versus -$0.73 in the prior year. This year, the market expects an improvement in earnings (-$0.65 versus -$2.10).
- UTIW, with its decline in revenue, underperformed when compared the industry average of 0.6%. Since the same quarter one year prior, revenues fell by 16.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: UTIW