Shares of CAI International (NYSE:CAI) jumped 45% higher on Friday after the transportation equipment finance provider agreed to be acquired for $2.9 billion. Mitsubishi HC Capital has agreed to pay $56 in cash per share for CAI, a significant premium over the company's Thursday close.
CAI's primary business is buying large equipment, primarily intermodal shipping containers and railcars, which it leases to shipping and transportation customers. The global pandemic and a faster-than-expected recovery has created an imbalance in shipping channels, and made containers hard to come by, leading to more demand for CAI's products.
It's a business where scale matters, and CAI in joining forces with Mitsubishi would become a much larger player in the market. Terms of the deal value CAI's equity at $1.1 billion, with Mitsubishi taking on about $1.8 billion in CAI debt as well.
Mitsubishi has been a consolidator of the market. Last Fall Mitsubishi UFJ Lease acquired Hitachi Capital, changing its name to Mitsubishi HC Capital once the deal closed.
CAI chairman David Remington in a statement said the deal is the culmination of discussions that began back 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," Remington said.
The market is pricing CAI shares just below the $56 takeout price, implying that the conventional wisdom is the deal will get done and no higher bidder will emerge. I think that is the correct assumption, and current shareholders should expect to get cash in their account sometime later this year.