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DSV omits share buyback and says it's actively chasing M&A

[COPENHAGEN] DSV A/S, one of the world's biggest freight forwarding companies, took the rare decision not to do a share buyback and said instead that it is "actively pursuing M&A opportunities."

The company delivered fourth-quarter earnings that matched analyst estimates, in a report that was overshadowed by speculation about its efforts to buy Panalpina. The Danish company didn't provide an update on any possible talks with Panalpina's board, but Chief Executive Officer Jens Bjorn Andersen seemed to underscore his commitment to the deal, saying "we believe that the right transactions can create value for all stakeholders," according to Thursday's statement.

Key Insights

DSV last month bid about $4 billion for Swiss peer Panalpina, hoping to add to a string of successful takeovers that have made the Danish company the world's fifth-biggest in an otherwise fragmented market. Panalpina's largest shareholder this week rejected the bid, though there's speculation it may accept a higher offer.

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DSV normally introduces a share buyback plan in connection with its quarterly earnings, but didn't do so on Thursday. That may fan speculation that it wants to preserve cash on an assumption that the Panalpina deal is likely to go through.

The company also signaled that it wouldn't overpay for Panalpina, saying "M&A is not a must"

And CEO Andersen can take comfort in the fact that his business doesn't seem to need M&A to grow. DSV's revenue went up by about 8 percent last year to a record and gross profit also reached an all-time high, growing by the same rate.

Market Reaction

The shares lost 12 percent in 2018 but are up about 24 percent so far this year. Trading will start at 9 a.m. local time in Copenhagen.

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It's worth noting that DSV proposed raising its dividend for 2018, to 2.25 kroner a share, or 423 million kroner (S$86.7 million) in total, from 2 kroner a year earlier. The company returned 4.5 billion kroner to shareholders last year, mostly in the form of buybacks.

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