Celadon Group purchased a 6.3 percent stake in rival truckload carrier USA Truck for $4.7 million, raising the prospect of a merger between the competitors.
A merger with $386.9 million USA Truck would make Celadon a $944 million company and one of the 10 largest truckload carriers in the nation. At about $7 a share, Celadon said USA Truck’s stock was “a potentially attractive investment.” USA Truck’s stock value climbed to about $9.50 a share Wednesday early afternoon.
Celadon said it had approached USA Truck management to discuss a potential combination in an Oct. 11 filing with the Securities and Exchange Commission.
Some analysts were skeptical the carriers would choose to merge. Stifel Nicolaus’ John Larkin said a Celadon-USA merger “does not appear imminent to us.” In a note to investors, Larkin noted an acquisition of USA Truck would depart from Celadon’s historic strategy of acquiring smaller, privately owned carriers.
In addition, USA Truck is recovering from two straight years of losses. The Van Buren, Ark.-based carrier posted a $598,000 profit in the second quarter. In contrast, $556.7 million Celadon has been steadily building profit, more than doubling profit in the second quarter from a year ago to $5.5 million.
“We believe synergies could be large if duplicate overhead is streamlined,” Larkin said, estimating an acquisition would add $3 million to Celadon’s bottom line.
The companies could find synergies short of an outright acquisition and merger, potentially sharing facilities or aligning networks to boost their capacity. The $4.7 million stock purchase is a shot in the arm for USA Truck as the carrier works to increase business with core customers and increase density in key lanes.
USA Truck said its board would evaluate Celadon’s filing. “We do not intend to comment further on this matter,” the company said in a statement.