Dive Brief:

• Ryder System is being targeted for acquisition by HG Vora Capital Management, according to a Friday SEC filing.
• HG Vora, which currently owns a 9.9% share of Ryder stock, proposes to purchase all outstanding stock of Ryder at $86 per share, valuing the deal at $4.4 billion.
• The valuation comes at a 20.3% premium to Ryder’s closing stock price as of May 12, according to the SEC filing. In a letter to Ryder, HG Vora implied they believed the company to be undervalued by the market.

Dive Insight:

Ryder confirmed the receipt of the bid on Friday, saying in a news release that its 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 pairs well with HG Vora's investment strategy of targeting companies that are well-managed but undervalued by the market, according to HG Vora's letter. The firm said it looks forward to the chance to realize the logistics and transportation company's "full potential" by going private.

"Our interest in Ryder began after management made a series of strategic decisions to improve the fundamental profile of the Company by 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," according to the letter.

Ryder has been on a years-long journey to improve its returns to investors, as detailed by CFO John Diez in a presentation at the JPMorgan 2022 Industrials Conference in March. Part of that strategy has involved diversifying its business mix by accelerating growth in its Supply Chain Solutions and Dedicated Transportation Solutions segments. Those segments now make up approximately 50% of the company's revenue versus 40% three years ago, according to Ryder's Q1 results. Its Fleet Management Solutions segment represents the other 50%.

"We've made tremendous progress over the last couple years to improve the overall returns profile of the business," Diez said at the March conference.

Ryder has also experienced strong sales growth in a favorable freight market. It achieved record Q1 financial results, driven by improved performance in fleet management and dedicated transportation.

The company's used vehicle sales and rentals have taken advantage of marketwide truck capacity constraints. But amid more recent fears of a freight downturn, executives said in an April earnings call that Ryder is investing more capital in light- and medium-duty trucks versus tractors to capitalize on the e-commerce boom.

"Our forecast continues to anticipate that the very strong used vehicle sales and rental market environment will moderate in the second half of the year, with slower freight growth partially offset by ongoing vehicle production constraints," Chairman and CEO Robert Sanchez said in an earnings release statement.