Morning Commentary: UTi Worldwide jumps on takeout news; Chesapeake recovers; SanDisk extends gains

By Rebecca Melvin

New York, Oct. 9 – UTi Worldwide Inc.’s convertibles climbed early Friday along with the underlying common shares after the Virgin Islands-based ocean freight and logistics company announced that it is being acquired by DSV for $7.10 per share in cash, which represents a 50% premium over UTi’s closing share price on Thursday.

The UTi deal triggers the change-of-control feature of the company’s 4.5% convertibles due 2019, and those bonds jumped to about 100 from the mid 70s, a New York-based trader said.

Elsewhere, some of the beaten-down issues in U.S. convertibles continued to rebound, particularly in the energy and technology sectors as outright buyers and momentum buyers stepped in.

There were still some market players selling into strength, but pricing remained firm for the most part, a New York-based trader said.

In energy, Chesapeake Energy Corp. continued to see recovery after being crushed several weeks ago.

“Some of the longer-dated stuff really had a good bounce,” the trader said of Chesapeake.

The Chesapeake 5.75% convertible preferreds were at about 72.25 bid, 73 offered at late morning, which was up from about 64 last week and compared to 73 two weeks ago.

The Chesapeake 5.5% convertibles also got beaten up pretty good, the trader said, and they are better. The Chesapeake 6.5% convertibles went down to about 90 from 97, and now they are back up to 97, he said.

Shares of the Oklahoma City-based energy company were lower in early trading, and last seen down 30 cents, or 3%, at $9.05.

In technology, SanDisk Corp.’s convertibles continued to trade actively and higher a day after news that it has inked a partnership with Hewlett-Packard Co. to develop new data storage solutions.

The SanDisk 0.5% convertibles due 2020 traded up over 101 early Friday from 100.75 at the close on Thursday.

Shares of the Milpitas, Calif.-based data storage chip maker were off $1.40, or 2%, at $62.71.

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