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YRCW overture to explore acquiring ABF is turned down

By Jeff Berman, Group News Editor
May 09, 2013

Arkansas Best Corporation, parent company of less-than-truckload carrier ABF Freight System, its largest subsidiary, said in an 8-K filing with the Securities and Exchange Commission yesterday that LTL transportation services provider YRC Worldwide approached ABC in late March to express its interest in exploring an acquisition of ABF.

Had a deal occurred, it would have been a startling development for an industry that has made significant strides since the depths of the recession, especially on the pricing front, but it was not meant to be apparently.

“In early April, ABC advised YRC that ABF was highly focused on its ongoing labor negotiations as well as other strategic and operational initiatives and that considering a transaction with YRC was not appropriate at that time” the ABC 8-K stated. “ABC has not engaged in any subsequent discussions with YRC.”

An ABF executive told LM that the company could not comment further on this matter at press time.

As reported in LM, ABF, the seventh-largest LTL carrier by revenue, said it has reached a tentative agreement on a contract for the next five years with the International Brotherhood of Teamsters.

Specific details of the agreement were not made available by ABF, but they said would be forthcoming.

In December, union locals representing 7,500 drivers, dockworkers, mechanics, and clerical staffers at ABF asked the carrier for a two-year contract with healthy wage and benefit increases. As previously reported, Teamsters locals are asking ABF for $1-per hour wage increases and additional contributions to their pension, health and benefit package.

The company has already asked that it negotiate separately from chief union rival YRC Worldwide, which has been revived financially under new President and CEO James Welch.

After breaking away from chief rival YRC Worldwide in an attempt to negotiate separately with the Teamsters National Freight Industry Negotiating Committee (TNFINC), ABF made an initial contract offer that the union says insulted ABF’s 7,500 drivers, dockworkers, mechanics and clerical staff.

ABF recently reported that for the first quarter revenue at $520.7 million was up compared to $440.9 million a year ago, and that it incurred a net loss of $13.4 million compared to an $18.2 million loss for the first quarter of 2012. ABF said that gains in revenue and tonnage on the LTL side were offset by higher wage and benefit costs for its Teamsters employees.

Were YRC and ABF ever to become part of the same LTL family, it would nullify the ongoing legal tangle between the carriers.

Last September, ABF has filed a notice of appeal in its ongoing lawsuit against the International Brotherhood of Teamsters, YRC Inc. and other related entities. And in November 2010, ABF signaled its intent to take legal action against the International Brotherhood of Teamsters, various subsidiaries of YRC Worldwide and other entities, following a ratified labor agreement by YRCW Teamsters members.  ABF said at the time that the reason for taking legal action was on the grounds that these organizations are violating the National Master Freight Agreement, which serves as the collective bargaining agreement for the majority of U.S.-based trucking employees.

YRC officials confirmed that it had made a preliminary proposal to acquire Arkansas Best Corp. They added that ABF President and CEO Judy McReynolds said she had shared and discussed it with the ABC board of directors, but it was declined because the timing was not right, said James Welch, YRC Worldwide CEO, in a statement.

“Our board and management believed then and believes now that the combination of Arkansas Best and YRCW would be in the best interests of all employees, customers and shareholders of both companies,” said Welch.  “We remain committed to continuing the great strides we have made at YRCW.”

Following February’s announcement that it had achieved a positive annual operating income in 2012 for the first time in six years, the Overland Park, Kan.-based carrier said earlier this month it had a positive first quarter operating income—also for the first time in six years. 

YRC’s consolidated operating revenue for the first quarter—at $1.162 billion—was down 2.7 percent compared to the first quarter of 2012. Meanwhile, its consolidated operating income increased from a $48.8 million loss a year ago to a $9.9 million gain in the first quarter, representing a $58.7 million increase. YRC officials said that first quarter operating income included a $4.5 million gain on asset disposals, which included an $8.3 million loss in 2012. And adjusted EBITDA—at $60.7 million—was $45.4 million more than the adjusted $15.3 million recorded a year ago.

Welch recently told LM that even with optimism brewing for his company, it needs to focus on what it does best, which is LTL trucking.

“This corporation got way too out of whack by kind of diversifying away from what it head always done best,” he said. “We need to continually focus on doing what we do best and find new and different ways to be efficient and competitive in the marketplace and grow our business a little more and we will continue to produce better results.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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