CAI International (CAI) stock soared 45 percent on Friday after the transportation equipment finance company agreed to be bought for $2.9 billion. CAI has been acquired by Mitsubishi HC Capital for $56 in cash per share, a considerable premium over the company’s Thursday closing.
CAI’s main activity is leasing heavy equipment to shipping and transportation companies, especially intermodal shipping containers and railcars. The global pandemic and a faster-than-expected recovery have thrown off shipping lines, making containers scarce, resulting in increased demand for CAI’s products.
It’s a business where size matters, and by partnering with Mitsubishi, CAI would become a much bigger participant. CAI’s equity is valued at $1.1 billion under the terms of the agreement, with Mitsubishi also taking on $1.8 billion in CAI debt.
Mitsubishi has been a market consolidator. Mitsubishi UFJ Lease bought Hitachi Capital last fall and renamed it Mitsubishi HC Capital after the acquisition finalized.
CAI Chairman David Remington said in a statement that the transaction represents the culmination of conversations that began in 2019, calling the sale “in the long-term best interests of our shareholders”
“We believe our shipping line customers and manufacturing partners will most certainly benefit from the scale and financial strength of the merged company.”CAI Chairman – David Remington
The market is pricing CAI shares just below the $56 takeout price, signaling that the sale will close and no higher bidder will emerge, according to common thinking. That, I believe, is the fair expectation, and current owners should expect to receive cash later this year.