Knight Transportation, Inc. (NYSE:KNX)(“Knight”), one of North America’s
largest and most diversified truckload transportation companies, today
announced 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. Today
Knight is well positioned to gain market share by leveraging our
services, technology, relationships and service center network, and we
are confident that the proposed transaction would further accelerate our
growth.
“Knight and USA Truck operate in complementary service lines, and this
proposed transaction would create an operationally and financially
stronger transportation company that is better positioned to deliver
value for all of our stakeholders,” continued Mr. Knight. “Our company
has a demonstrated history of operational excellence, and we believe
that we can meaningfully increase the financial performance of USA
Truck’s operations. Knight is ready and willing to complete this
transaction, and we are prepared to take the necessary steps to realize
the benefits inherent in this proposed combination.
“We look forward to the opportunity to engage constructively with USA
Truck’s Board to discuss our proposal and to agree upon the terms of a
transaction that is beneficial for both companies and all of our
stakeholders. Although we believe our current proposal would provide
full and fair value to USA Truck shareholders, we would be prepared to
modestly increase our proposed purchase price if additional value is
identified during the due diligence process,” Mr. Knight concluded.
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.
Below is the text of the letter that was sent on August 28, 2013, to USA
Truck’s Board of Directors:
August 28, 2013
Board of Directors
USA Truck, Inc.
3200 Industrial Park Road
Van
Buren, AR 72956
Attn: Robert A. Peiser
Gentlemen:
As you know, Knight Transportation, Inc. (“Knight”,
“we”, “our”,
or “us”) has invested significant time and
effort to advance a Knight / USA Truck combination. We are writing this
letter to share our frustration with USA Truck’s unwillingness to
constructively engage with us regarding our interest in a transaction
while at the same time communicating directly to the Board of USA Truck
the significant value we would propose to pay for the USA Truck shares
as well as our rationale for a combination.
Based on an extensive analysis we have performed of the Company’s
publicly disclosed information, at this time we are prepared to acquire
all of the outstanding shares of common stock of USA Truck for an
all-cash purchase price of $9.00 per share. This proposed purchase price
reflects a significant premium equating to approximately 58% to USA
Truck’s closing price of $5.69 on August 27, 2013. Our proposal would
provide your shareholders with immediate liquidity for their shares at
an attractive price, without being subject to the significant execution
risk associated with your current turnaround plan. We would note that
although the Company’s operational performance has improved, the
Company’s operating ratio remains above 100%, its book value continues
to fall, and the share volume remains quite limited, making it difficult
for your shareholders to achieve liquidity.
Although we believe our proposal would provide full and fair value to
your shareholders, we would be prepared to modestly increase our
proposed purchase price if we were allowed to conduct due diligence and
the Company were to demonstrate to us value that we have not already
identified.
We believe there would be no impediment to completing a transaction on
an expedited basis. Based on discussions we have had with our potential
financing sources, we are confident that we would be able to readily
obtain the financing necessary to complete a transaction. As such, our
proposal is not subject to any financing contingency. Moreover, based on
our knowledge of the trucking industry, we do not believe there would be
any antitrust impediment to completing a transaction.
Knight’s interest in a Knight / USA Truck combination is motivated by
our belief that there is a compelling strategic rationale for a
combination of our two companies:
-
Knight and USA Truck operate in complementary service lines, both with
young tractor fleets with similar average lengths of haul.
-
Knight and USA Truck share similar positive cultures: Both the Knight
and USA Truck teams are hard-working, ethical, dedicated,
family-oriented and committed to providing quality service to
customers.
-
Knight believes that it can improve operational efficiencies at USA
Truck – and do so more quickly than the USA Truck management team can
alone.
-
Knight can finance USA Truck’s capital needs on a lower cost basis.
This letter is not a binding offer, and there will be no binding
agreement between us or any commitment or obligation on either party
with respect to a potential transaction unless and until a definitive
agreement is executed by Knight and USA Truck. Knight’s proposal is
subject to customary conditions, including, among other things, Knight’s
satisfaction with the results of due diligence in Knight’s sole
discretion, the negotiation of a mutually satisfactory definitive
agreement, and the approval of the negotiated terms of a transaction by
Knight’s Board of Directors.
We are prepared to meet with members of the Board of Directors to
discuss any aspect of our proposal and believe there could be a
transaction with Knight that would be viewed as highly favorable by your
shareholders.
We kindly request that by September 6, 2013, the USA Truck Board of
Directors formally: (i) affirm to Knight a willingness to constructively
advance discussions towards a transaction, or (ii) communicate to Knight
a lack of willingness to constructively advance discussions. Absent a
satisfactory response, we will consider all options available to us,
including making your shareholders aware of our offer.
We look forward to hearing back from you.
Very truly yours,
Kevin P. Knight
Chairman and CEO
Knight Transportation, Inc.
Knight’s proposal is subject to the satisfaction of customary closing
conditions. The proposed transaction is not subject to any financing
condition. Knight has significant financial flexibility to acquire all
of the outstanding shares of USA Truck and to assume or refinance USA
Truck’s existing indebtedness. With USA Truck’s cooperation, it is
anticipated that the proposed transaction could close as early as the
fourth quarter of 2013.
Evercore is acting as financial advisor to Knight and Fried, Frank,
Harris, Shriver & Jacobson LLP is acting as Knight’s legal advisor.
About Knight Transportation
Knight Transportation, Inc. is a provider of multiple truckload
transportation services using a nationwide network of service centers in
the U.S. to serve customers throughout North America. In addition to
operating one of the country’s largest tractor fleets, Knight also
partners with third-party equipment providers to provide a broad range
of truckload services to its customers while creating quality driving
jobs for our driving associates and successful business opportunities
for owner-operators.
Forward-Looking Statements
Some statements set forth in this press release, including those
regarding Knight’s proposal to acquire USA Truck and the expected impact
of an acquisition of USA Truck on Knight and its financial results and
operations, contain forward-looking statements that are subject to
change. Statements including words such as “believe”, “expect”, or
similar words as well as statements in the future tense are
forward-looking statements. These forward-looking statements are subject
to risks and uncertainties that could cause actual events or actual
future results to differ materially from the expectations set forth in
the forward-looking statements. Some of the factors which could cause
results to differ materially from the expectations expressed in these
forward-looking statements include the following: the possibility that
an acquisition of USA Truck by Knight may not be completed; the risk
that, if the acquisition is completed, Knight may face difficulty or be
unable to enhance the performance of USA Truck’s operations or
successfully integrate USA Truck’s operations; and other factors
identified from time-to-time in Knight’s filings with the Securities and
Exchange Commission. All forward-looking statements in this press
release are qualified by these cautionary statements and are made only
as of the date of this news release.
Copyright Business Wire 2013