Knight-Swift Transportation to purchase U.S. Xpress Enterprises for $808M

PHOENIX and CHATTANOOGA, Tenn. — Knight-Swift Transportation Holdings Inc. plans to purchase U.S. Xpress Enterprises Inc for approximately $808 million, excluding transaction costs.

According to a news release, the transaction has been unanimously approved by the Knight-Swift board of directors and a special committee of the independent directors of the U.S. Xpress board of directors.

The deal is expected to close late in the second quarter or early third quarter of 2023, subject to customary closing conditions.

U.S. Xpress stockholders are set to receive 310% premium over U.S. Xpress’ closing stock price on March 20, 2023.

The U.S. Xpress brand and separate operations will continue, according to the news release.

“The opportunity to add one of the largest and most well-known brands in our industry, with significant opportunity to improve earnings, gain customers and reach more professional drivers, was very compelling to us,” Knight-Swift CEO Dave Jackson said. “We expect to apply the same playbook that proved successful in the Knight-Swift merger as we share best practices, improve operations and work together to help U.S. Xpress become the best that it can be.”

Jackson noted that although it will take time, particularly given the current freight environment, “we would not have pursued the transaction unless we were confident in achieving our return thresholds within a few years. Beyond that, we will continue to work with the U.S Xpress team in pursuit of the performance levels of our other truckload businesses over the next several years, so the opportunity for our stockholders is substantial. Moreover, this transaction will not slow down the geographic expansion of our LTL network or our other growth initiatives, as our financial and other resources remain significant.”

John Rickel, Lead Independent Director and Chair of the U.S. Xpress Special Committee, said that the Special Committee evaluated the transaction against the company’s standalone prospects and current macroeconomic environment and unanimously determined that the compelling and certain cash consideration is in the best interest of all U.S. Xpress stakeholders and maximizes value for its stockholders.

“Knight-Swift is a proven operator with a strong track record in the industry, and we are confident this transaction is the best path forward for U.S. Xpress,” he added.

Based on 2022 results, U.S. Xpress is expected to add approximately $2.2 billion in total operating revenue (including $1.8 billion in truckload revenue), 7,200 tractors and 14,400 trailers to Knight-Swift’s consolidated enterprise. After the transaction, Knight-Swift’s consolidated revenue run-rate is expected to approach $10 billion, while the truckload fleet will have approximately 25,000 tractors and 93,000 trailers.

For 2022, U.S. Xpress total revenue comprised approximately 36% dedicated truckload, 34% U.S. Xpress Inc. irregular route truckload, 14% Total Transportation of Mississippi irregular route truckload, and 16% brokerage. Portions of the U.S. Xpress business are performing reasonably well, such as the Total Transportation subsidiary, while the most underperforming irregular route business unit matches up well with Knight-Swift’s strengths.

“We are very pleased to deliver to our stockholders the opportunity for near-term liquidity at a significant premium,” U.S. Xpress CEO Eric Fuller said. “Additionally, joining the Knight-Swift team is an exciting opportunity for our people, our customers, and the Chattanooga and other communities we call home. The increased scale, operating expertise and resources of the combined entity will allow U.S. Xpress to pursue new levels of service and efficiency. We’re delighted that U.S. Xpress will continue to operate as an independent brand and will do so with the support and partnership of one of North America’s strongest transportation companies.”

Knight-Swift operates one of the largest asset-based truckload fleets in North America while delivering leading profitability.

The truckload business generates most of the capital Knight-Swift deploys for growth, diversification and returning capital to shareholders, such as the $1.5 billion invested in acquisitions in the less-than-truckload sector and $733 million spent on share buybacks and dividends over the past three years.

For perspective, in 2013, the year before the acquisition of Barr-Nunn, Knight Transportation’s truckload segment generated $822 million in revenue and $106 million in GAAP operating income (12.9% operating margin). By 2022, through internal growth and several acquisitions, Knight-Swift’s consolidated truckload segment generated $4.5 billion in revenue and $747 million in GAAP operating income (16.5% operating margin).