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In SEC filing Knight says USA Truck's poor financials prove bid fair

Knight Transportation said Monday in a filing with the Securities and Exchange Commission it continues to believe that its $9 per share proposal to acquire USA Truck is significantly more attractive than USA Truck’s standalone prospects. (The Trucker file photo)

The Trucker News Services

11/4/2013

PHOENIX — Knight Transportation has filed a presentation with the Securities and Exchange Commission in connection with its proposal to acquire USA Truck in which Knight says it believes that USA Truck’s recent financial results demonstrate only limited improvement and that its recent share price surge is unsupported by either industry or company specific fundamentals. 

Knight also said it continues to believe that its $9 per share proposal to acquire Van Buren, Ark.-based USA Truck fully and fairly values USA Truck and that its proposal is significantly more attractive than USA Truck’s standalone prospects.

Knight first made the $9 offer to buy all outstanding shares in late September, putting the equity of USA Truck at about $95 million.

The transaction’s total value, however, was estimated to be $242 million and would include USA Truck’s some $147 million in outstanding debt.

Knight had already purchased about 8 percent of USA Truck’s outstanding stock at the time the offer was made. Not long after, Knight announced it had purchased additional shares, bringing its total to 11.3 percent of USA Truck’s total shares.

USA Truck responded to the original offer saying it was disappointed the proposed purchase had been made public and at the same time announced it was rejecting the offer.

Later, USA Truck filed suit against Knight Transportation, saying the Phoenix-based carrier had improperly used USA Truck’s confidential information to begin “a creeping hostile acquisition of USA Truck at a price that the USA board has unanimously concluded does not reflect the company’s full intrinsic value.”

In the filing with the SEC Monday, Knight noted that USA Truck’s truckload segment operating ratio remains above 100 percent and improved only modestly from 103.8 percent in the second quarter of 2013 to 103.6 percent in the third quarter of 2013.  Knight said it continues to believe that USA Truck’s turnaround plan remains fraught with significant execution risk and notes that USA Truck’s limited cash flow generation has constrained its fleet investment, such that USA Truck now operates one of the oldest fleets among its publicly traded peer group, with an average tractor age of 2.5 years and average trailer age of 6.4 years.

Knight continues to believe its offer is good, especially in light of what it called USA Truck’s consistent underperformance, including nine consecutive quarters of losses totaling approximately $30 million.

Knight’s filing cited as executive risks at USA Truck the carrier’s soft volumes, high driver turnover and driver compensation pressure, a soft pricing environment and increasing regulatory constraints as a few of the challenges USA and the trucking industry more broadly

Knight said it remained 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.

Knight said its $9 offer made on Sept. 26 represented a significant premium of approximately 39 percent to USA Truck’s closing price on Sept. 25, the last trading day prior to public announcement of Knight’s proposal; a premium of approximately 50 percent to USA Truck’s average closing price for the 10 trading day period prior to Knight’s announcement; and a premium of approximately 58 percent to USA Truck’s closing price on Aug. 27, the last trading day prior to Knight’s Aug. 28, 2013, proposal letter to USA Truck’s Board of Directors.

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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