Knight Transportation to Acquire USA Truck for $9.00 Per Share in Cash

 Knight Transportation, Inc. (NYSE:KNX)(“Knight”), one of North America’s largest and most diversified truckload transportation companies, announced on September 26 that it has proposed to acquire all of the outstanding shares of USA Truck, Inc. (NASDAQ:USAK) for $9.00 per share in cash, valuing the equity of USA Truck at approximately $95 million.

The total value of the proposed transaction is approximately $242 million, including USA Truck’s approximately $147 million of outstanding net indebtedness. The proposal represents a significant premium of approximately 39% to USA Truck’s closing price on September 25, 2013, the last trading day prior to this announcement; a premium of approximately 50% to USA Truck’s average closing price for the ten trading days preceding this announcement; and a premium of approximately 58% to USA Truck’s closing price on August 27, 2013, the last trading day prior to Knight’s August 28, 2013, proposal letter to USA Truck’s Board of Directors.

Knight also announced today that it has filed a Schedule 13D with the U.S. Securities and Exchange Commission disclosing ownership of 829,946 shares of USA Truck common stock, representing approximately 8% of USA Truck’s shares outstanding.

“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,” said Kevin Knight, Chairman and Chief Executive Officer of Knight. “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.”

Knight believes that there are compelling strategic and financial benefits for a combination of the two companies, including:

• The $9.00 per share all-cash proposal represents a significant premium to USA Truck’s current share price and would provide shareholders with immediate value and liquidity for their shares;
• Knight’s proposal would eliminate the significant execution risk of USA Truck’s turnaround plan and reverse the erosion of value stemming from eight consecutive quarters of USA Truck net losses aggregating approximately $30 million or approximately $3 per USA Truck share;
• Knight’s proposal would liberate USA Truck shareholders from selling constraints imposed by USA Truck’s illiquidity, as evidenced by its average daily trading volume of only approximately 11,000 shares during the three month period ending September 25, 2013;
• Knight can finance USA Truck’s capital needs on a lower cost basis, reducing the risk to meeting the business’ ongoing capital obligations; and
• The transaction is expected to be accretive to Knight’s expected earnings per share in 2014 and beyond. Knight’s consolidated operating ratio for the six months ended June 30, 2013, was 85.3%, compared with USA Truck’s consolidated operating ratio of 101.7% during the same period, and Knight expects to realize considerable operational improvements at USA Truck.

Tags: Knight Transportation, USA Truck

Category: General Update