The hostile takeover effort against Van Buren-based USA Truck by Knight Transportation is over. At least for now.
The two trucking companies announced Tuesday (Feb. 4) the settlement of litigation filed Oct. 10, 2013, by USA Truck against Knight. The lawsuit, filed in Crawford County Circuit Court, accused Knight officials of “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.”
Prior to the lawsuit, Phoenix-based Knight went public on Sept. 26 with a $9 per share bid for USA Truck – which at the time was a 39% premium from USA Truck’s share price on Sept. 25. The share purchase and assumption of liabilities creates a $242 million deal. At risk in a deal with Knight would be some or all of the 500 jobs at USA Truck’s corporate headquarters in Van Buren.
The USA Truck management and Board of Directors rejected the offer, saying it “substantially undervalues” the company and does not reflect the value of potential gains from ongoing turnaround initiatives.
On Oct. 17, USA Truck filed a quarterly earnings report that was better than what market watchers expected. The company reported a third-quarter loss of $602,000, a big improvement over the $6.072 million loss posted in the third quarter of 2012. For the first three quarters of the year, the income loss for USA Truck is $3.975 million, better than the almost $19.5 million loss during the same period of 2012.
Officials with Knight were not impressed.
“Knight continues to believe that its $9 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 noted in a statement issued Nov. 4.
But Knight’s push to convince USA Truck shareholders to sell the company has been brought to a legal “standstill.” The deal announced Tuesday notes that “Knight Transportation will 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,” until Sept. 30, 2014. Also, Knight will not vote with the USA Truck share it owns at the USA Truck shareholders meeting.
“We are pleased that the parties have reached a settlement. 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,” explained the statement from USA Truck. “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.”
Officials with Knight issued this statement: “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 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. At this time, our focus is on leveraging our industry-leading operating efficiency to continue gaining market share and meeting the needs of our customers while considering other potentially value-enhancing external growth opportunities.”
Halting the Knight attempt is the second successful pushback by USA Truck officials against a takeover attempt within the past three years. Indianapolis-based Celadon announced in October 2011 its intent to acquire USA Truck. USA Truck officials rejected the request, and Celadon moved to an easier target. Celadon officials sold the shares of USA Truck on Feb. 28, 2012, and on Feb. 29 announced it had “purchased a significant portion of the operating equipment of Teton Transportation, Inc.”
Shares of USA Truck (NASDAQ: USAK) closed Wednesday at $13.81, up 23 cents. During the past 52 weeks, the share price has ranged from a $16.38 high to a $4.37 low. The company is scheduled to release its fourth quarter and full year earnings report on Feb. 11 before the markets open.