Knight Transportation is trying to acquire all of the outstanding shares of USA Truck, despite a recent rejection of its acquisition bid by USA Truck’s board of directors, according to U.S. Securities and Exchange Commission documents filed today.
Knight Transportation, No. 23 on JOC’s ranking of the Top 50 Trucking Companies, proposed on Aug. 28 to acquire all of the outstanding shares of USA Truck, No. 40 on the Top 50 Trucking Companies list, for $9 per share in cash, valuing the equity of USA Trucks at about $95 million. The total value of the proposed transaction would have been approximately $242 million, including USA Truck’s estimated $147 million of outstanding net indebtedness.
However, on Sept. 6, USA Truck’s board of directors rejected Knight Transportation’s proposal, calling it “inadequate” and saying “the company is not for sale.” In light of USA Truck’s negative response, Knight Transportation communicated to USA Truck that the company “saw no merit in engaging in discussions directly with USA Truck management.”
As a result, Knight Transportation is now trying to appeal to USA Truck stockholders, saying they will find the $9 per share proposal to be “very attractive.” Knight Transportation also disclosed ownership of 829,946 shares of USA Truck common stock, representing approximately 8 percent of USA Truck’s shares outstanding.
“We are confident that USA Truck shareholders will share our strong belief that Knight’s $9 per share all-cash, premium proposal would provide significant and immediate cash value that is significantly more attractive than USA Truck’s standalone prospects,” said Kevin Knight, chairman and CEO of Knight, in a written statement. “Although we believe our current proposal would provide full and fair value to USA Truck shareholders, we would be prepared to modestly increase our proposed purchase price if additional value is identified during the due diligence process.”
Kevin Knight further explained that he believed the benefits of combining the two companies included providing shareholders with immediate value, eliminating “significant” execution risk of USA Truck’s turnaround plan, liberating USA Truck shareholders from selling constraints imposed by USA Truck’s “illiquidity,” financing USA Truck’s capital needs and bolstering Knight’s expected earnings per share in 2014 and beyond.
USA Truck’s stock price closed on Aug. 27 at $5.69 per share. The company reported a net loss of $17.5 million for the full year of 2012, falling further from a net loss of $10.8 million during the same period in 2011. USA Truck adopted a stockholder’s rights plan in 2012 to help fend off a hostile takeover and give it time to implement its turnaround strategy. It also rejected a proposal to merge with Celadon in October 2011.