USA Truck Files Lawsuit Against Knight Transportation for Breach of Contract, Wants Stock Divested

by Lance Turner  on Friday, Oct. 11, 2013 6:56 am  

USA Truck says Knight Transportation has used confidential information to initiate "a creeping hostile takeover of USA Truck at a price that does not reflect the full intrinsic value" of the company.

USA Truck Inc. of Van Buren has filed a breach of contract lawsuit against Knight Transportation Inc., the company that is attempting to take over USA Truck.

The lawsuit, filed in Crawford County Circuit Court, alleges that Knight "improperly" used USA Truck's confidential information "to begin a creeping hostile acquisition of USA Truck at a price that the Board has unanimously concluded does not reflect the Company's full intrinsic value," according to a statement from USA Truck.

The lawsuit seeks to require Knight "to restore a level playing field" by divesting the USA Truck shares that USA Truck says Knight acquired in violation of the confidentiality agreement. Since making its takeover offer public, Knight has increased its stake in USA Truck to 12 percent from 8 percent.

"USA Truck's Board of Directors is very disappointed that Knight is doing exactly what it promised not to do: use confidential information that it was provided in the context of friendly and private discussions regarding a negotiated transaction between the companies to initiate a creeping hostile takeover of USA Truck at a price that does not reflect the full intrinsic value of USA Truck.

"As stated in the Company's release dated September 26, the Company has previously offered to meet with Knight and remains open to all strategic options that reflect the full intrinsic value of USA Truck, including further discussions with Knight," USA Truck said in a statement.

Knight revealed in September that it had offered USA Truck $9 per share in cash for the company in August. USA Truck rejected the offering, saying it undervalued the company. Knight then decided to take the offer straight to shareholders.

In all, Knight's 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 closing price the day before the offer was made public.

USA Truck's Thursday statement noted that Moelis & Company of New York and Stephens Inc. of Little Rock are acting as its financial advisors, and that Latham & Watkins LLP of Los Angeles and Kutak Rock LLP of Omaha, Neb., are acting as its legal advisors.

On Tuesday, Knight lowered its earnings guidance for its third and fourth quarters, citing lower miles per tractor year over year, revenue per mile improvement that fell short of expectations, and increased driver recruiting, training and payroll costs.

The company also said soft freight demand, challenges related to recruiting qualified drivers, and the new industry-wide regulations governing hours of service that went into effect in July 2013 also affected the quarter.

The company is scheduled to report earnings on Oct. 23.

Shares of Knight (NYSE: KNX) closed at $16.46 per share on Thursday. Shares of USA Truck (Nasdaq: USAK) closed at $8.97.

 

 

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