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CAI announces review of ‘strategic alternatives’

Container lessor and logistics company has hired Centerview Partners as strategic financial adviser.

CAI, one of the largest lessors of international containers, is looking at "strategic alternatives" (Images: Jim Allen/FreightWaves)

CAI International Inc. said its board of directors has hired Centerview Partners as a  strategic financial adviser “to explore and evaluate the company’s strategic alternatives to maximize stockholder value.”

CAI is one of the leading lessors of international shipping containers, with a fleet of nearly 1.7 million twenty-foot equivalent units (TEUs) of leased and owned containers. It also has a logistics subsidiary.

CAI previously said it plans to sell its third business, which leases railcars. That division has a fleet of just over 5,500 railcars.

“There can be no assurance that a transaction or other action will result, or if a transaction is undertaken, its terms or timing,” said CAI, adding that it “does not intend to disclose further developments with respect to its strategic process, unless and until its board approves a specific transaction or action or otherwise concludes the strategic review.”

In August, the investment manager Andrew M. Weiss and companies affiliated with him said they had purchased 5.67% of CAI’s stock. In a 13-D filing with the Securities and Exchange Commission on Aug. 16, they said CAI’s stock “has not reflected, and continues not to reflect, the issuer’s intrinsic value; in fact, the issuer’s common share price of $19.38 at the close of trading on [on Aug. 22] represents an approximately 42% discount to the issuer’s $33.77 book value per common share as of June 30.” A Nov. 21 SEC filing said the Weiss group had increased its holdings to 7.2%. 

CAI is a leading container lessor. (Image: Jim Allen/FreightWaves)

In the past 52 weeks, CAI’s common stock has traded on the New York Stock Exchange for as little as $17.87. At around midday Dec. 16, it was reaching a 52-week high of $28.50.

The Weiss group said at CAI’s annual shareholders meeting in June and in other communications that it had urged the company’s board “to engage a recognized financial adviser to assist the issuer in conducting a full review of all operational and strategic alternatives that may be available to maximize shareholder value, including, without limitation, the possibility of selling all or substantially all of the issuer and/or its assets at a price reflecting fair value for common shareholders.”

Drewry Maritime Research’s Container Census & Lease Industry Annual Report 2019/20 report ranks CAI as having a 7% market share in the container leasing industry in terms of TEUs. The report shows Triton International Ltd. as the largest with a 28% share, Florens with a 17.4% share, Textainer with a 15.6% share and Seaco with an 10.5% share.

Drewry Maritime Research ranks CAI as the fifth largest container lessor by TEU.

Michael Webber of Webber Research noted that CAI has traded at a discount to book value for some time. He said in a research note that “trading at/near book value makes sense for CAI, with this strategic review potentially prompting that long awaited value reversion.”

Webber said there could be interest in acquiring CAI by private equity companies or another container leasing company such as Triton or a company operating in a different part area of the shipping industry such as Seaspan Corp., which owns containerships and charters them to liner operators.

There has been consolidation in the container leasing business in recent years. The Ontario Teachers Pension Plan acquired SeaCube Container Leasing in 2013, Triton acquired TAL International in 2016. HNA Group acquired two container leasing companies–GE SeaCo in 2011 and Cronos in 2015, and then merged them into Seaco. In September, Bloomberg reported that sources had told it HNA considering reviving a plan to sell Seaco.

In the first nine months of 2019, CAI had net income of $16.5 million on revenue of $316.3 million. In the third quarter, CAI had a loss of $6.95 million on revenue of $107.6 million.  

Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.