Union Pacific to sell Overnite

Union Pacific to sell Overnite

Union Pacific Corp. on Monday said it would sell its Overnite trucking unit in an initial public offering amid an improved market for less-than-truckload haulers.

Union Pacific, the largest U.S. rail operator, did not disclose the expected price of the IPO, but a regulatory filing says Overnite's book value was about $600 million on Dec. 31.

The planned spin-off of Richmond, Va.-based Overnite, which had revenue of $1.35 billion in 2002, comes just weeks after its two biggest rivals in shared-load trucking agreed to merge. On July 8, Yellow Corp said it would pay about $1 billion for Roadway Corp.

Rates for less-than-truckload carriers have been picking up, and the freight transport sector has seen stock prices rise by about 24 percent since the beginning of the year.

Union Pacific, based in Omaha, said in a news release that it hopes to sell its entire 100 percent stake in Overnite, if demand causes underwriters to fully exercise their right to buy more shares.

The business consists of Overnite Transportation Co. and Motor Cargo Industries, which employ 14,400 people combined, according to a preliminary prospectus filed with the U.S. Securities and Exchange Commission.

For the first quarter, Overnite reported a 3 percent rise in net income to $9.3 million, while revenue increased 10 percent to $341.2 million.

The company has 208 service centers and other assets, including 6,000 tractors and 21,000 trailers, worth about $1 billion, according to the prospectus.

Overnite's prospects were also boosted by the end of a Teamsters strike against the unit last fall. Earnings have also strengthened since the collapse last September of Consolidated Freightways, the third-largest LTL hauler and a major rate discounter.