EGL Shares Jump on CEO's Buyout Bid Wednesday January 3, 1:27 pm ET EGL Shares Leap on CEO's Offer to Take Company Private; Analysts See No Competing Bids Ahead
NEW YORK (AP) -- Shares of EGL Inc. surged on Wednesday, a day after the company's chief executive offered to take the freight forwarding company private for $36 per share, or about $1.46 billion.
Shares of Houston-based EGL gained $8.09, or 27 percent, to $37.78 in midday trading on the Nasdaq. The stock has traded in a 52-week range of $28.57 to $53.80.
EGL received the offer on Tuesday from James R. Crane, who as chairman and chief executive also ranks as its largest shareholder with about 18 percent of outstanding stock. General Atlantic LLC, a private equity firm, joined Crane in the bid, which represents a 21 percent premium over the closing price of EGL stock on Friday.
Other key executives at EGL also offered backing to the deal and Crane said he could raise about $1.13 billion in debt financing from senior lending sources.
EGL formed a special committee to review the offer and hired legal counsel. The committee also plans to hire independent financial advisers to assist in its analysis.
Art Hatfield, an analyst at Morgan Keegan & Co., said he's confident Crane and his associates can raise the capital and close the deal, although at $36 it would be done at a discount to EGL peers Expeditors International of Washington Inc. and UTi Worldwide Inc.
Jon A. Langenfeld, an analyst at R.W. Baird, also considers $36 the low end of a reasonable takeout range for EGL, but does not expect a competing bid since management supports Crane.
"Further, given that forwarding is a people-intensive business, a secondary bid competing against the existing senior management team would likely be destructive to the business model," the analyst said in a research note on Wednesday.
Todd C. Fowler, an analyst at KeyBanc Capital Markets, added that EGL does not represent an attractive strategic fit to other freight forwarders because of its exposure to the air freight markets.
"We believe it is unlikely the company will receive any counteroffers," Fowler said in a research note.
Shares of other names in the sector also gained ground on the news. Shares Expeditors International added $1.53, or 3.8 percent, to $42.03, while UTi Worldwide jumped $1.05, or 3.5 percent, to $30.95. Both stocks trade on the Nasdaq.
Just the expenses for AIRT to be a public entity are enough justification for the company to be taken private.
The average micro cap company spends roughly $750,000 annually on exchange fees, audit fees, and other professional services. For AIRT, this equates to almost $0.20/year in EPS!! This would be immediate savings for a buyer.
I always wonder about the morality of a CEO taking a company private. Was he really working for the benefit of the shareholders to increase share value? Is it to his benefit to keep the outlook hidden and the share price down so he can get a better deal and bigger profit? There certainly seems to be a conflict of interest to me. Any other thoughts? By the way, this is a general question and not directly concerning AIRT.