USA Truck's Poison Pill Ready as It Fights Off Knight Transportation

by Marty Cook  on Monday, Nov. 11, 2013 12:00 am  

Cliff Beckham

USA Truck Inc. of Van Buren has a shareholder rights plan but that might not be enough to hold off a determined rival intent on buying the company.

Then again, USA Truck may be safe with or without a “poison pill,” as such rights plans are often called, if its stock price shows staying power.

Knight Transportation Inc. of Phoenix announced in September that it had offered USA Truck a $242 million package for the company in August. The offer was $9 per share ($95 million cash) and the assumption of $147 million in debt, but USA Truck’s board rejected the offer, which board members said undervalued the company.

USA Truck shares had been trading at less than $6 a share, but since Knight Transportation’s announcement, the share price has soared, clearing $14 briefly at one point Monday. Knight now owns more than 1.3 million USA Truck shares, a 12.4 percent stake.

USA Truck filed a lawsuit against Knight claiming a breach of contract and requesting that Knight forfeit its purchased USA Truck shares. Knight denied the allegations and released a 17-page presentation Nov. 4 that said USA Truck’s promising third-quarter financial results showed “only limited improvement” and its share price was unsupported.

Analysts said Knight’s press release last week was directed at those who had pushed USA Truck’s share price to more than $13 after it had been traded at much lower prices in the preceding weeks. USA Truck was at $6.46 on Sept. 25, nearly $12 on Oct. 21 and has been more than $13 the past few trading days.

One argument is that the rise in market value proved USA Truck was correct in rejecting the offer as too low. The counter-argument is that Knight’s interest in purchasing the company is the reason the stock rose.

Knight said it might pay more than $9 — if the price stays high Knight may not have a choice if it wants to buy USA Truck — but Knight took steps to quash some of the price-inflating speculation. That’s what last week’s news release was about.

“They’re not willing to pay $14,” said Donald Broughton, a transportation analyst with Avondale Partners in St. Louis.

This is the second takeover attempt of USA Truck in as many years. In late 2011, Celadon Group of Indianapolis bought 6 percent of USA Truck stock, but USA Truck rebuffed a meeting, the takeover bid fizzled and Celadon sold its shares last year.

In November 2012, USA Truck announced its board of directors had adopted a shareholder rights plan to protect itself from future takeover bids. The company noted that it knew of no current interest from other companies.

That has changed, of course.

 

 

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