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

Can the rights plan save USA Truck from the Knight at the door? The plan specifies that should a person or group (in this case Knight) acquire 15 percent of USA Truck stock, other shareholders would then be eligible to buy an additional $24 worth of shares at a 50 percent discount.

Analysts said such poison pill provisions can be effective defenses against hostile takeover bids, especially for smaller companies. About 7.7 percent of Fortune 500 and 7.6 percent of S&P 500 companies have similar provisions, so they’re not exactly common but they aren’t rare either.

Cliff Beckham, the CFO of USA Truck, said the company adopted the rights plan to protect its shareholders while the company’s recovery plan was given a chance to work. The rights plan will expire in November 2014 unless it is voted out at the annual shareholders’ meeting in May.

“We don’t want them losing the earning benefit of our turnaround while we’re still in the early innings,” said Beckham, who declined to comment on Knight’s presentation. “The rights plan strengthens our existing shareholders’ interest.”

(Late last month, USA Truck also sought to protect the company’s executive officers, implementing bonus and severance packages to assure the “focus” of the management team, which is “critical to the successful execution of the Company’s turnaround strategy.”)

One analyst said USA Truck could face pressure from investors with large holdings of stock. Before Knight expressed interest, USA Truck stock was lightly traded, and now with a robust stock price, someone itching to liquidate a few hundred thousand shares may be tempted to side with Knight in order to do so.

But at $9? Maybe in September. But now it looks like the stock won’t drop close to Knight’s target range anytime soon, so USA Truck won’t need any poison pills, though that may hinge on fourth-quarter results.

“They’ve narrowed their operating losses but they’re still losing money,” Broughton said of USA Truck. “The best way to defend against a hostile takeover is a return to profitability. The best defense is success.”



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