On Tuesday morning, two of the nation’s largest carriers announced plans for a multi-million dollar acquisition to be completed later this year.
In a March 21 announcement, Knight-Swift announced that the companies had entered into an agreement to acquire U.S. Xpress for approximately $808 million, excluding transaction costs.
The transaction has been approved by the Boards of both companies and is expected to close late in the second quarter or early in the third quarter of 2023, according to a news release.
U.S. Xpress will continue under its own brand and will maintain separate operations in order to “minimize disruptions for the driving associates, shop and office employees, and customers.” Senior management at U.S. Xpress will remain in place through the transition process prior to closing, the companies say. Swift executives Tim Harrington and Josh Smith will join U.S. Xpress as President and CFO, respectively, when the transaction is completed.
The acquisition of U.S. Xpress is expected to add approximately $2.2 billion in total operating revenue (including $1.8 billion in truckload revenue), 7,200 tractors, and 14,400 trailers to Knight-Swift’s consolidated enterprise, based on last year’s results.
From the news release:
The total enterprise value of $808 million for U.S. Xpress represents Knight-Swift assuming U.S. Xpress’ $484 million of outstanding debt and finance leases and purchasing its outstanding equity for $324 million, or $6.15 per share, and excludes its $336 million of operating lease liabilities for the purposes of this calculation (debt and lease balances as of December 31, 2022). As of December 31, 2022, U.S. Xpress had approximately $96 million in outstanding borrowings under its secured revolving credit facility and $388 million in other long-term debt and finance leases. Knight-Swift expects to repay and terminate the U.S. Xpress secured revolving credit facility at closing while seeking to retain in place U.S. Xpress’ existing primarily fixed-rate equipment and real estate financing arrangements. Knight-Swift had approximately $1.3 billion unrestricted cash and available liquidity on December 31, 2022, a portion of which will fund the transaction.
Knight-Swift CEO, Dave Jackson, commented, “The opportunity to add one of the largest and most well-known brands in our industry, with significant opportunity to improve earnings, gain customers and reach more professional drivers, was very compelling to us. We expect to apply the same playbook that proved successful in the Knight-Swift merger as we share best practices, improve operations and work together to help U.S. Xpress become the best that it can be. 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. Beyond that, we will continue to work with the U.S Xpress team in pursuit of the performance levels of our other truckload businesses over the next several years, so the opportunity for our stockholders is substantial. Moreover, this transaction will not slow down the geographic expansion of our LTL network or our other growth initiatives, as our financial and other resources remain significant.”
U.S. Xpress CEO, Eric Fuller, said: “We are very pleased to deliver to our stockholders the opportunity for near-term liquidity at a significant premium. Additionally, joining the Knight-Swift team is an exciting opportunity for our people, our customers, and the Chattanooga and other communities we call home. The increased scale, operating expertise and resources of the combined entity will allow U.S. Xpress to pursue new levels of service and efficiency. We’re delighted that U.S. Xpress will continue to operate as an independent brand and will do so with the support and partnership of one of North America’s strongest transportation companies.”
John Rickel, Lead Independent Director and Chair of the U.S. Xpress Special Committee, said: “The Special Committee evaluated the transaction against the company’s standalone prospects and current macroeconomic environment and unanimously determined that the compelling and certain cash consideration is in the best interest of all U.S. Xpress stakeholders and maximizes value for its stockholders. Knight-Swift is a proven operator with a strong track record in the industry, and we are confident this transaction is the best path forward for U.S. Xpress.”
This is a developing story.