In this paper, we study the capacity of UAV networks for high-accuracy localization of targets. We address the problem of designing a distributed control scheme for UAV navigation and formation based on an information-seeking criterion maximizing the target localization accuracy. Each UAV is assumed to be able to communicate and collaborate with other UAVs that are within a neighboring region, allowing for a feasible distributed solution which takes into account a trade-off between localization accuracy and speed of convergence to a suitable localization of the target. Such an investigation also considers communication latency constraints as well as safety requirements such as inter-UAV and obstacle collision avoidance.