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Ryder System Inc. on May 13 confirmed receipt of a $4.4 billion offer to be acquired by HG Vora Capital Management, a proposal that Wall Street analysts said reflects the high value the potential buyer sees in the leasing company’s business.
“Consistent with its fiduciary duties and in consultation with its financial and legal advisers, the Ryder board of directors will carefully review and evaluate the indication of interest to determine the course of action that it believes is in the best interest of the company and its shareholders,” Ryder said in a statement provided to Transport Topics.
In its offer, HG Vora said the $86 per share price for all outstanding common stock it doesn’t currently own represents a 24.8% premium to the trailing 30-day volume weighted average price, and a 20.3% premium to the closing stock price on May 12.
“Our interest in Ryder began after management made a series of strategic decisions to improve the fundamental profile of the company,” HG Vora said in a May 13 filing for the offer. “We value the management team’s acumen and deep experience operating the business, and are excited about the opportunity to realize Ryder’s full potential in the private markets.”
HG Vora noted those strategic decisions include prioritizing adequate returns on capital over fleet expansion, investing in higher-growth asset-light business segments, underwriting to more conservative residual assumptions and returning capital to shareholders. The hedge fund already owns 9.9% of Ryder common shares. The offer is subject to revision based on a due diligence review.
Ryder saw its shares jump 17% to close at $83.65 the day of the offer.
“When the offer was placed on [May 13] it was about a 20% premium to where the stock was trading,” KeyBanc analyst Todd Fowler told TT. “So, certainly a view that the shares were very much undervalued.”
Ryder manages about 239,000 commercial vehicles, and has seen steady growth over the past year amid a constrained supply chain that has confronted bottlenecks and equipment shortages.
“I would say we are a little bit surprised — from a timing standpoint — given where we’re at in the overall freight cycle and the demand cycle,” Fowler said of the offer. “Typically, we see offers like this when the environment hasn’t been quite as robust. Somebody wouldn’t be paying for peak results. And that’s kind of the environment that we’ve been in recently — a very strong rental environment, very strong used equipment environment.”
Vertical Research Partners research over the past few months has indicated the company was trading at a discount to its value. “I guess we’re not the only people that feel that way,” Vertical Research analyst Jeffrey Kauffman told TT, even as he noted some on Wall Street have felt trepidation about the company’s business.
“There are investors that are concerned about the possibility of recession in a year. There are investors that are concerned that the company is earning more than it normally would because of the high gains on sale with equipment. So, I think investors for that reason have kind of bid down the stock in anticipation of a normalization of the economy,” he said.
But Stifel Equity Research analyst Bert Subin noted that, from a strategic perspective, there is not another clear suitor for Ryder since the truck leasing sector is already fairly consolidated. An offer from another big player could draw antitrust pushback, he said
“I think it sort of caught us by surprise, because you don’t really think about Ryder as an acquisition target,” Subin told TT. “I think what it does say is that, if HG Vora is confident enough to pay a 20% premium here — or from when they put in that offer — they think there’s an opportunity to take advantage of evaluation dislocation. That’s pretty interesting. I think that’s good overall for the group — now it’ll make people start thinking about trucking.”
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