USA Truck Rejects $242M Takeover Offer by Knight Transportation

by Lance Turner  on Thursday, Sep. 26, 2013 8:11 am  

While USA Truck reported a net loss of $1 million for the quarter, it was an improvement from the $3.5 million loss it reported for the second quarter of 2012.

(Editor's Note: A correction has been made to this article. See the bottom of this article for details.)

USA Truck Inc. of Van Buren has rejected a takeover offer by Knight Transportation of Phoenix, which offered $9 per share in cash for the company in August. And now Knight is taking the offer straight to shareholders.

In a news release, publicly traded Knight said its takeover offer is worth $242 million, including an equity value of USA Truck at $95 million and $147 million in company debt. It said the $9 per share price represents a "significant premium" of about 39 percent to USA Truck's Wednesday closing price, and 50 percent premium over the company's average closing price for 10 days before the proposal was announced.

Shares of USA Truck (Nasdaq: USAK) closed up 9 cents to $6.46 per share on Wednesday. On Thursday, shares rose more than 40 percent to $9.10 per share. Shares of Knight (NYSE: KNX) rose 7.5 percent Thursday to around $17.18.

"We are confident that USA Truck shareholders will share our strong belief that Knight's $9.00 per share all-cash, premium proposal would provide significant and immediate cash value that is significantly more attractive than USA Truck's standalone prospects," Kevin Knight, Knight's chairman and CEO, said in a news release.

"For Knight's shareholders, we are confident that a combination with USA Truck would create value by further enhancing our position as a leading provider of multiple truckload transportation services in North America. Today Knight is well positioned to gain market share by leveraging our services, technology, relationships and service center network, and we are confident that the proposed transaction would further accelerate our growth."

Knight said it already owns 8 percent of outstanding USA Truck shares.

In a filing made Thursday with the U.S. Securities and Exchange Commission, Knight said USA Truck rejected its offer and said "the company is not for sale." Knight said that it has "at various times" made "several proposals" to buy USA, all of which USA has rejected.

"On August 28, 2013, Knight Transportation submitted to USA Truck a written proposal to acquire all of the outstanding Shares for $9.00 per share in cash. On September 6, 2013, USA Truck's Board of Directors rejected Knight Transportation’s August 28, 2013 proposal as inadequate and indicated that 'the Company is not for sale' ..."

"Notwithstanding USA Truck's rejection of its proposal, Knight Transportation believes that USA Truck stockholders will find its $9.00 per share proposal to be very attractive. Accordingly, Knight Transportation decided to publicly disclose its proposal by issuing the press release ..."

In that press release, Knight outlined several reason why it thinks a merger would be good for both companies and their shareholders:

  • The companies have "complementary service lines," and a merger "would create an operationally and financially stronger transportation company."
  • Knight can "can meaningfully increase the financial performance of USA Truck's operations."
  • The deal "would eliminate the significant execution risk of USA Truck's turnaround plan," reversing "the erosion of value stemming from eight consecutive quarters of USA Truck net losses."
  • "Knight can finance USA Truck's capital needs on a lower cost basis."

Knight also said it would be open to modestly increasing its proposed purchase price "if additional value is identified during the due diligence process."



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