Knight Transportation “disappointed” in rebuff of $242 million offer for USA Truck

By John D. Schulz, Contributing Editor
October 01, 2013 - LM Editorial

Phoenix-based Knight Transportation, one of the top and most profitable truckload companies, says it is “disappointed” that USA Truck has rejected Knight’s $9 per share, all cash offer to take over the financially ailing Van Buren, Ark.-based truckload carrier.
The offer was for $95 million in equity, plus assumption of $147 million in USA Truck debt, making the total enterprise value of the failed bid $242 million. That would be one of the largest rejections of a purchase of a publicly held truckload carrier since the Great Recession began in 2008.
The Knight-USA combination would have been the largest TL acquisition since Con-way Inc. bought Contract Freighters Inc. in 2007.
“We are disappointed that USA Truck has once again rejected Knight’s all-cash, premium proposal,” Knight Transportation said in a statement.
Knight added that since making its proposal public, it held discussions with “several” of USA Truck’s largest shareholders that have indicated their support for its proposal. Knight said based on those conversations, it took the necessary steps to acquire USA Truck.
“We continue to believe that a combination of Knight and USA Truck is better positioned to deliver value for and is in the best interest of all of Knight and USA Truck’s stakeholders, and we are prepared to take the necessary steps to make this combination a reality,” Knight added in its statement.
Rapidly growing Knight Transportation ranks as the nation’s sixth-largest TL carrier, solidly profitable with revenue growth of 8.1 percent last year to $936 million. It is expected to exceed $1 billion in revenue this year, joining Schneider, Swift, U.S. Xpress, Werner Enterprises and Landstar in the $1 billion TL club.
USA is large, but not profitable. It ranked as the nation’s 29th largest TL carrier with a revenue decline of 7.4 percent last year to $297.6 million, from $321.3 million in 2012. It operates about 2,100 power units.
Knight, which has consistently posted operating ratios in the low to mid-80s, has an operating philosophy of buying smaller TL carriers as a “tuck-in” acquisition theory. It basically does this on a regional basis, acquiring key customers and quality drivers in the process to help it build freight density in east-west traffic lanes.

Knight already owns approximately 11.3 percent of USA Truck’s shares outstanding, according to a Sept. 26 Securities and Exchange Commission filing. The $9 per share cash offer represented what Knight called “a significant premium” of approximately 39 percent to USA Truck’s closing price on Sept. 25, the last trading day before its offer was made public.
USA Truck said that it is still open to all strategic options. It said it was open to further talks with Knight Transportation. But USA added that it still feels that moving forward as a stand-alone company with its strategic plan is the best way to provide value to its shareholders.

About the Author

John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.

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