Hostile Takeover Attempt Made ABC Stronger

FORT SMITH — Forgive Arkansas Best Corp. officials if the sheer mention of August 1988 makes them twinge just a bit.

That’s when President and CEO Robert Young Jr. was blind-sided in a hostile takeover attempt, one eventually won by ABC although the company came out of the ordeal battered and bruised.

David Humphrey, director of investor relations at ABC, remembers “the weird day” the news of the takeover attempt hit.

“That morning was happy — everyone was so happy because we had just heard that we had found the land for the new office,” Humphrey said. “But, that afternoon we didn’t know if we were going to have jobs. It threw us into total turmoil and chaos.”

David Stubblefield, president of ABC subsidiary ABF Freight System Inc., recalled the day as “absolute trauma.”

Emanuel Pearlman, a 28-year-old from New York, had revealed to the Securities and Exchange Commission his stock ownership in ABC exceeded 5 percent. He formed Razorback Acquisitions to buy controlling interest in ABC, initially offering a bid of $240 million for ABC and its subsidiaries. The stock market crash on Oct. 19, 1987, a.k.a. “Black Monday,” had seen ABC’s stock plunge from about $30 per share to $8. Pearlman jumped at that price.

Young said he wasn’t aware of how such buyouts worked at the time. An investment banker informed Young of Pearlman’s intentions. Young told Bill Legghis, his investment adviser at Morgan Stanley, to tell Pearlman, “We weren’t interested.” To which Legg responded, “Well, that’s not really one of your options.”

Pearlman soon upped his stock ownership to 10 percent. It was speculated that Pearlman really wanted the real estate ABC had acquired in building three Los Angeles area truck terminals. The land was now valued much higher than its original purchase price. If Razorback Acquisitions had indeed managed the takeover, it likely would have sold off ABC’s assets for a quick profit and left the rest of the company in ruin.

Young had to figure a way to resolve the problem quickly. He got what he called “a friendly white knight” in Kelso & Co. of New York to take ownership of ABC with a $316 million offer. Kelso had a timetable for getting a return on the investment and agreed to support ABC’s corporate mission in the interim.

To raise additional capital, ABC sold subsidiaries USA Truck of Van Buren and Trans-State Lines of Fort Smith.

The battle ended about six weeks later.

“If we had screwed up, we were dead,” Young said.

ABC then made the decision to purchase WorldWay Corp., the holding company for Carolina Freight Carriers, a firm ABC needed to reach the East Coast market. But ABC went in debt for about $450 million with equity of only about $45 million. ABC also became a private company for four years as it fought its way out of the hole created by the takeover attempt.

Young, who owns 10 percent of the stock, said the company is better for it today.

“What we didn’t pay attention to was that if you’re a public company, you’re for sale,” Young said. “That’s definitely a reality. If someone makes an offer on your stock above the market value, they’re likely to get most of it. The only alternative is to outbid them.

“I think the company came out of it well. But, there was about four years there where we were living on a pretty tight budget, and that’s an understatement. It was a period of time we couldn’t have a bad quarter. If we had failed to make a payment, we would have gone out of business. We learned a lot of things out of it. That which doesn’t kill you makes you stronger.”