by Lance Turner
Posted 2/4/2014 05:18 pm
Updated 10 months ago
Knight Transportation Inc. of Phoenix and USA Truck Inc. of Van Buren have called off their legal battle, and Knight has ended its $242 million takeover bid for the company.
Under the terms of the settlement agreement, both companies will file a joint stipulation to dismiss USA Truck's breach-of-contract lawsuit against Knight "in its entirety with prejudice." In return, Knight entered into "standstill and voting agreements" valid through September.
Per the standstill agreement, Knight agreed to "not acquire any securities or assets of USA Truck, propose any tender or exchange offer to acquire USA Truck securities or any consent solicitation, or seek representation on the Board of Directors of USA Truck."
The company also said it will not vote the USA Truck shares it owns at USA Truck's 2014 shareholder meeting.
"Our agreement with USA Truck represents a positive outcome for our company, as it resolves all related litigation while preserving our flexibility with respect to our investment," Knight Chairman and CEO Kevin Knight said in a news release.
"Knight Transportation may continue to own shares in USA Truck and, subject to the terms of the agreement, may consider its options in the future regarding that investment," he said.
"We are pleased that the parties have reached a settlement," USA Truck said in its statement. "USA Truck's management team and employees have been focused on executing plans to restore the company's profitability and unlock its earnings leverage potential through improved operational excellence, profitable revenue growth and cost effectiveness.
"Nevertheless, by eliminating any of the distractions that have been created by this litigation, the settlement is a positive outcome for USA Truck's employees, customers and shareholders," the company said.
Knight offered $9 per share in cash for USA Truck in August. USA Truck rejected the offering, saying it undervalued the company. In October, after Knight made its offer public, USA Truck filed a breach of contract lawsuit against Knight, alleging that Knight "improperly" used USA Truck's confidential information "to begin a creeping hostile acquisition of USA Truck."
The lawsuit sought to require Knight to divest the USA Truck shares that USA Truck says Knight acquired in violation of the confidentiality agreement. Knight had steadily increased its stake in USA Truck after making the offer public. A trial in the case had been set for April 14.
Throughout its back-and-forth with Knight, USA Truck claimed progress in a broad turnaround effort.
"Operational improvements we have achieved are not a one-time phenomenon," USA Truck CEO John Simone said in November at the Stephens 2013 Fall Investment Conference in New York. "They are repeated and sustainable. We have more drivers and better asset productivity. Our turnaround plan has gained momentum in each of the last three quarters."
The company's share price (Nasdaq: USAK) also rebounded. It traded around $6.46 on Sept. 25, just before Knight's takeover offer was made public. On Tuesday, shares closed at $13.58.