Knight Transportation, Inc. is continuing to press the campaign it launched in late August to take over USA Truck (USAT) by buying up outstanding shares of the Van Buren, AR-based provider of truckload and dedicated freight services.
The intended has characterized Knight’s overture as a “creeping hostile acquisition.” But USAT has not—yet anyway-- ruled out a deal, even though it spurned the most recent offer for being “inadequate, as it substantially undervalued USA Truck…”
This is not USAT’s first time in the M&A foxhole. Just two years ago, it rejected a proposal for merger talks with another large truckload carrier, Celadon Group, Inc., according to a market-analysis piece posted on SeekingAlpha.com.
USAT’s operations are centered in the South and range up to Philadelphia and Chicago and down to San Antonio. What’s more, the company’s Laredo terminal handles cross-border freight.
On the other hand, Phoenix-based Knight provides truckload and containerload services on a national scale. But most of its lanes are along the West Coast and the Northeast— suggesting that rolling in USAT is seen by Knight as a strategic move worth diligent pursuit.
Stepping up the pressure on September 26th, Knight proposed to acquire all of the outstanding shares of USA Truck for $9.00 per share in cash.
Knight said that its offer represented “a significant premium of approximately 39% to USA Truck’s closing price on September 25, 2013, the last trading day prior to public announcement of Knight’s proposal; a premium of approximately 50% to USA Truck’s average closing price for the ten trading day period prior to Knight’s 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.”
But USAT did not bite. Quite the contrary, USAT issued a blistering news release that stated its “Board of Directors unanimously viewed Knight’s $9.00 per share proposal as inadequate as it substantially undervalued USA Truck in light of the initiatives undertaken by our new management team.
“However,” the statement continued, “the Company offered to meet with Knight to discuss the reasons why the Company viewed Knight’s proposal as inadequate. Surprisingly, on September 13, 2013, Knight rejected the Company’s offer to meet and informed USA Truck that it saw no point in engaging in further transaction discussions with USA Truck at that time.
“While the Company remains open to all strategic options, including further discussions with Knight, we believe that executing our strategic plan will offer superior value to our shareholders,” USA Truck added.
Any such “further discussions” may be in jeopardy given that on Oct. 11th, USAT sued Knight Transportation for breach of contract for, among other things, “improperly using 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.”
On the other hand, in its news release on the lawsuit, USAT again reiterated that “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.”
Far from backing off, this weekKnight deployed a new tactic by filing a presentation with the Securities and Exchange Commission (SEC) on its bid for USAT. The presentation has been filed with the SEC and is available at www.sec.gov.
Yesterday, Knight Transportation publicly stated that it “continues to believe that its $9.00 per share, all-cash proposal fully and fairly values USA Truck, especially in light of USA Truck’s consistent underperformance, including nine consecutive quarters of losses totaling approximately $30 million.
“Knight remains confident that its premium proposal is significantly more attractive than USA Truck’s standalone prospects, and Knight remains willing to modestly increase the proposed purchase price if USA Truck can demonstrate value that has not already been identified,” the company added.
Indeed, how this battle turns from here may well hinge on a single word: “modestly.”
