Overnite Corp., the less-than-truckload (LTL) arm of Union Pacific Corp. (UP), will soon have a chance to see if it can stand on its own. UP recently announced that it has filed for an initial public offering (IPO) of $100 million in common stock in the trucking concern. The railroad decided to spin off its trucking unit because it deemed that Richmond, Va.-based Overnite was not a core business asset.

The spin-off comes at a time of great change in the LTL market, with Consolidated Freightways shutting down a year ago and Yellow Corp. announcing in July that it would buy rival Roadway Corp.

UP initially believed that the two companies might offer both rail and road services to a shared customer base, but that business model never jelled. "When Overnite was purchased back in 1986, [UP] thought there would be some business synergies, but they didn't really materialize," says Kathryn Blackwell, the railroad's general director of corporate communications. "LTL carriers tend to have a significantly different customer base than the railroad does."

Union Pacific says the fact that it is seeking to spin off the motor carrier through an IPO does not indicate that Overnite is not a valuable asset. Indeed, the LTL trucker reported record profits last year. Today it boasts $1 billion in assets; in the second quarter of this year, Overnite reported $372 million in operating revenue and $21 million in operating income. Rather, UP's top management believes that without the two companies working as a cohesive unit, it simply doesn't make sense for the railroad to hold onto it.

"We feel that Overnite is a good company that can stand on its own," Blackwell says. "If it's not going to be a core asset to UP, then it should be standing as its own corporation."