US-BASED UTi Worldwide has revealed that a lack of forwarding growth and a soft market were among the key factors that encouraged the board of the company to accept a US$1.35 billion acquisition offer from Danish logistics group, DSV.
In a note to employees explaining the company's latest statements filed to the US Securities and Exchange Commission (SEC), CEO Ed Feitzinger praised staff for their efforts. But he explained that the market conditions and outlook meant that the company had missed its third-quarter earnings targets and its projected future results - excluding the improvements within the group's contract logistics and Distribution business (CL&D) - were likely to be much lower than originally forecast, Lloyd's Loading List reported.
"We are pleased that the acquisition process is moving along as expected so far, and we expect to complete the steps necessary for a vote on the merger before the end of the first quarter of calendar 2016. As I have said before, the great work each of you do every day is what made us an attractive merger partner for DSV.
"However, as we saw in our Q2 earnings, the forwarding market has been much softer than we expected, and we faced a scale problem in forwarding as a result. You'll see from the projections published in the 'Preliminary Proxy Statement' that we expected this situation to continue.
"While we have shown modest growth in air forwarding, it has not been enough to offset our scale challenges. The combination of a lack of forwarding growth and a soft market meant our results going forward - CL&D improvement aside - were likely to be much lower than originally forecasted. This outlook was one of the many factors that prompted our Board to approve the transaction with DSV".
Source : HKSG.