The managing member of ADW Capital Partners LP of New York City has called for a change in leadership and a selling off of divisions at USA Truck Inc. of Van Buren.
In a letter to the trucking company’s board of directors, Adam Wyden said he would like to see CEO John Simone ousted. He also said the company’s board should consider the sale of its truckload division, the sale of its Strategic Capacity Solutions division or the “sale of USA Truck in its entirety.”
Wyden, 30, and the son of U.S. Sen. Ron Wyden, D-Ore., said his $30 million hedge fund owns about 3 percent of USA Truck stock (Nasdaq: USAK), purchased in the months after Knight Transportation of Phoenix made public its $242 million bid to takeover the company.
The letter to USA Truck’s board, which Wyden made public Monday, said Simone has had more than enough time to turn the company around. In the past two years, Wyden has written similar letters to at least four other companies in which ADW has a minority stake.
More: Read the entire letter here.
“I’d like to see them fire John Simone,” Wyden said. “It’s ridiculous they had Cliff Beckham there so long. I know people in the South like to be nice. I’m not interested in being an Arkansas blue blood. You’ve got a trucking company that is not making any money.”
The call for Simone’s ouster comes 18 months after Simone took over as CEO USA Truck and less than one month after the firm posted its first quarterly profit since 2011.
On July 31, USA Truck posted second-quarter net income of $700,000, or 7 cents per share, a rebound from a $1.4 million loss in the same quarter last year.
In a phone interview Monday, Wyden complained about the USA Truck’s leadership selling off shares of the company, specifically Beckham, USA Truck’s CFO and former chief executive, who is leaving the company effective Sept. 30.
Since announcing his resignation Aug. 7, Beckham has sold off several chunks of stock. In an unrelated interview with Arkansas Business on Friday, Beckham said it was the first time he’d sold any USA Truck shares and would retain about half his holdings.
Beckham was CEO of USA Truck for five years before Simone was hired. Beckham didn’t respond to a request for comment on Monday.
“I’m very dissatisfied with the company,” Wyden said. “Cliff was very successful in running the company into the ground.”
In the letter and in a phone interview, Wyden compared USA Truck’s struggles to those of P.A.M. Transportation Inc. of Tontitown. The majority stockholders in P.A.M. (Nasdaq: PTSI) are Chairman of the Board Matthew Moroun and his father, Manuel.
“The Morouns were able to turn PTSI around in one year,” Wyden said. “John can’t figure it out. A lot of people are saying give them more time, give them more time, give them more time. These guys are blowing smoke up everybody’s butt. Three to five years is unacceptable. They don’t have the right stuff.”
Simone responded to Arkansas Business by email saying he had no comment.
Wyden also said he thinks Knight Transportation is preparing to make another attempt at purchasing USA Truck. USA Truck sued Knight for breach of contract earlier this year but reached a settlement in February that prohibited Knight from acquiring any more USA Truck stock until September.
Knight sold 142,000 shares of USA Truck stock earlier this month. Wyden believes it’s to drive the price of USA Truck stock down to make it easier to acquire a controlling interest.
“We believe USA Truck’s Board of Directors should explore all available strategic alternatives which should include a complete replacement of management and divisional leadership, an operational restructuring plan to align segment fixed costs with segment revenues, a full and/or partial sale of its truckload division, a sale or spinoff of USA Truck’s SCS division, and/or a sale of USA Truck in its entirety,” Monday’s letter to USA Truck’s board said.
ADW expressed concern for the current direction of the company while it conceded the appreciation of USA Truck’s shares since late 2012 when it restructured its board and sought a new CEO, ultimately hiring Simone.
ADW credited the lion’s share of the appreciation to the attempted takeover by Knight Transportation — not “evidence of a substantial turnaround” by USA Truck. When Knight’s takeover bid was announced, USA Truck traded at $6.46. It closed Monday at $18.72.
“We believe USA Truck’s current disappointing market valuation continues to reflect shared investor concern over the long term viability of USA Truck’s company-wide profitability, senior management’s inability to manage a truckload business of this size and the workings of a ‘ho-hum’ corporate culture with most company officers having very little invested in USA Truck,” ADW’s letter said.
“Those who do have an equity stake in USA Truck also seem to sell at every opportunity possible,” the letter said. “Why should these people be running USA Truck if they don’t believe or care about its future?”