Knight-Swift Transportation reportedly plans to purchase rival freight carrier U.S. Xpress Enterprises for a whopping $808 million. According to the Wall Street Journal, that figure is estimated at four times U.S. Express’ stock value. However, the move gives Knight-Swift a fleet of roughly 25,000 and 93,000 trailers, making it one of the country’s largest.
“The opportunity to add one of the largest and most well-known brands in our industry, with a significant opportunity to improve earnings, gain customers and reach more professional drivers, was very compelling to us,” Knight-Swift CEO Dave Jackson reportedly stated. “Although it will take time, particularly given the current freight environment, we would not have pursued the transaction unless we were confident in achieving our return thresholds within a few years.”
Onboarding U.S. Xpress’s 7,200 tractors and 14,400 trailers is not likely to be a losing proposition, even if Knight-Swift overpays based on stock value. The organization acknowledged that adding the assets and accompanying truckload revenue would swell Knight-Swift’s operating revenue by as much as $2.2 billion. Coupled with its already highly profitable freight transportation operation, the company anticipates hitting the $10 billion annual run rate. Knight-Swift expects to take on only $484 million of U.S. Xpress debt.
U.S. Xpress CEO Eric Fuller, son of founder Max Fuller, took the organization public in 2018. The company’s shares had declined significantly over the last year, from $4.66 to $1.50 at the close of business Monday, March 20. He indicated he was very pleased to negotiate a premium deal that hovers around $6.15 per share.
“Additionally, joining the Knight-Swift team is an exciting opportunity for our people, our customers, and the Chattanooga and other communities we call home,” Fuller reportedly stated. “The increased scale, operating expertise, and resources of the combined entity will allow U.S. Xpress to pursue new levels of service and efficiency.”
Knight-Swift is expected to pay approximately $291 million in cash at the closing. The sale has reportedly been approved by the U.S. Express board and the deal appears on track to be finalized by the end of the 2023 third quarter. Although Knight-Swift has been aggressively buying up smaller outfits to expand its national footprint, this ranks as the largest deal since acquiring AAA Cooper Transportation for $1.35 billion in 2021. Knight-Swift saw $7.4 billion in overall revenue last year, a figure that was up by almost 24 percent over the previous year.
Sources:
https://www.timesfreepress.com/news/2023/mar/21/knight-swift-to-buy-us-xpress-for-808-million/
https://www.wsj.com/articles/trucking-giant-knight-swift-transportation-to-buy-u-s-xpress-c763d424
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