Knight-Swift further expands LTL presence, with acquisition of MME

Taking steps to further expand its United States less-than-truckload (LTL) operations, Phoenix-based national truckload carrier Knight-Swift announced yesterday it has acquired 100% of RAC MME Holdings LLC, which is better known in trucking circles as MME (with the brand names Midwest Motor Express Inc. and also Midnite Express Inc.).

The purchase price was $150 million in cash, according to Red Arts Capital, a private equity fund focused on supply chain, transportation, and logistics businesses, whom owned MME as one of its portfolio companies.

Knight-Swift officials said that the deal is expected to be $0.06 accretive to its Adjusted EPS in 2022. And they added that on a longer-term basis the company has “identified potential areas of revenue and cost synergies that are expected to lead to growth and margin expansion consistent with our return-on-investment targets while preserving MME’s brand, locations, people, and culture.”

With MME in the fold, this deal expands Knight-Swift’s LTL footprint into 15 states.

Established more than a century ago, MME provides LTL, full truckload, and specialized and international logistics transportation services for several verticals, serving the upper midwestern and great northwestern regions of the United States.

This acquisition follows Knight-Swift’s formal entry in the LTL market in July, when it acquired Dothan, Alabama-based LTL carrier AAA Cooper Transportation and its affiliated entity AAA Cooper for $1.35 billion. At the time of this acquisition, Knight-Swift said that LTL will be the second-largest segment for Knight-Swift, while also noting that non-truckload trucking revenue as a percent of total expected revenue has increased from 22% to 27%. It also noted that the LTL sector is well-positioned for supply trends toward forward-positioned inventory, and e-commerce.

It also noted that it will provides Knight-Swift with leading positions across truckload, dedicated, intermodal, brokerage, 3rd party carrier services, and also LTL, which it said will continue to lower cycle volatility, add growth, and deploy capital towards strong returns.   

“We are excited to welcome MME to the Knight-Swift organization,” said Knight-Swift CEO, Dave Jackson in a statement. “MME is our next step toward a nationwide LTL network. While preserving and supporting MME’s identity and culture, we expect to bring many synergies from Knight-Swift. MME and ACT have minimal regional overlap, and we expect they will be a benefit to one another.”

Knight-Swift officials did not reply to further requests for comment on this deal at press time.

Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders and also Managing Partner of BGSA Holdings, a leading mergers and acquisitions advisory firm focused on the transportation, logistics, and supply chain technology sector, said that the Knight-Swift acquisition of MME illustrates how public transportation and logistics companies can make aggressive deals that are accretive to earnings.

“Since the public markets value companies like Knight-Swift at a premium to private markets, they can afford to pay 6x EBITDA and still see their earnings per share increase,” he said. “It also reflects the power of consolidation transportation.”

Robert W. Baird & Co. analyst Garrett Holland wrote in a research note that this acquisition represents a smaller but important step, for Knight-Swift, in building out its national LTL footprint.

“MME represents a small/complementary acquisition that underscores KNX’s national ambitions in LTL,” wrote Holland. “The growing contribution from the LTL business (~14% of revenue) helps reduce KNX’s cyclicality and mitigates earnings risk in 2023 as the freight cycle likely matures. In just a few months, KNX has emerged as a formidable player in the attractive LTL market, which should represent a tailwind for valuation re-rating over time.”