Knight ratchets up takeover bid for USA Truck

by The City Wire staff ([email protected]) 147 views 

Knight Transportation on Monday (Sept. 30) turned up the heat in what is clearly a hostile takeover attempt of Van Buren-based USA Truck.

Officials with Phoenix, Ariz.-based Knight announced they had increased from 8% to 11.3% their ownership of USA Truck shares, and claimed that “several” large shareholders groups supported Knight’s $9 per share offer for USA Truck.

Knight made public its bid for USA Truck on Sept. 26. The per share bid is a 39% premium from USA Truck’s share price (NASDAQ: USAK) on Sept. 25, and a 58% premium compared to the Aug. 27 closing price – the day before Knight sent its first proposal letter to the USA Truck Board of Directors. The share purchase and assumption of liabilities creates a $242 million deal.

“We are disappointed that USA Truck has once again rejected Knight’s all-cash, premium proposal,” Knight officials noted in the press release posted Monday (Sept. 30). “Since making our proposal public, we have had discussions with several of USA Truck’s largest shareholders that have indicated their support for our proposal and have encouraged us to continue to take the necessary steps to acquire USA Truck.  We continue to believe that a combination of Knight and USA Truck is better positioned to deliver value for and is in the best interest of all of Knight and USA Truck’s stakeholders, and we are prepared to take the necessary steps to make this combination a reality.”

An official with USA Truck declined comment on Knight's statement issued Monday.

USA Truck officials have said the Knight offer “substantially undervalues” by not reflecting potential gains from the ongoing turnaround initiatives. USA Truck has reported four consecutive years of losses. During the first half of 2013, the company reported a loss of $3.5 million, better than the $8.4 million in the same period of 2012.

The USA Truck Board hired in February veteran trucking exec John Simone to replace Cliff Beckham as CEO. Simone has more than 30 years of operational and management experience in the transportation industry with leading companies that include UPS, Ryder, and Greatwide Logistics.

“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,” noted a Friday (Sept. 27) statement from USA Truck.

The company also enacted in November 2012 a “Rights Plan” that seeks to block a company or individual from owning more than 15% of USA Truck shares. The plan – essentially a poison pill provision – also puts in place a 10-day “redemption period” that gives USA Truck officials “the opportunity to negotiate” with anyone who seeks to buy shares beyond the 15% cap.

The plan gives shareholders the right to “extinguish” the plan during the 2014 annual meeting.

“The Board believes it is appropriate to adopt the Rights Plan in light of the significant recent decline in the market price of the Company's common stock and the fact that the Company is in the process of implementing its turnaround plan,” noted the federal Securities and Exchange filing by USA Truck.

The top five institutional investors of USA Truck, according to the company’s 2013 Proxy, are:
• Grace & White (New York City), 11.5%
• Donald Smith & Co. (New York City, 9.9%
• GAM Holding AG (Switzerland), 9.3%
• Entities affiliated with T. Rowe Price (Baltimore, Md.), 9.1%
• Dimensional Fund Advisors (Austin, Texas), 7.8%

The largest individual shareholders are former USA Truck CEOs Robert Powell (9.4%) and James “Breck” Speed (7.8%).