Van Buren-based USA Truck Inc. contends a buyout offer by Knight Transportation Inc. substantially undervalues the company and is not in the best interest of its shareholders.
USA Truck released the statement late Thursday after Knight made public its $9-per-share offer that was rebuffed by USA Truck’s board of directors. The $242 million deal values the company’s equity at $95 million and includes assumption of $147 million in company debt. Knight owns about 8 percent of USA Truck’s outstanding stock.
USA Truck has seen two years of consecutive quarterly losses and is in the midst of a turnaround plan. It has put in place a stockholder-rights plan, known as a poison pill, to make hostile takeover attempts costly.
On Friday, USA Truck shares dropped 21 cents, or 2.4 percent, to close at $8.59. The trucking company’s shares surged on the news of the offer Thursday, gaining 36 percent on the Nasdaq exchange.
A spokesman for Knight Transportation declined to comment further beyond Thursday’s release. In its statement, Knight said the two companies combined would be better positioned to provide value to their shareholders and that Knight management could meaningfully improve USA Truck’s financial performance. Knight indicated that it could increase its offer if additional value is found.
Shares of Knight were down 9 cents Friday, or less than a percentage point, to close at $16.51 on the New York Stock Exchange. Shares of Knight were up nearly 4percent Thursday on the news of its offer to USA Truck.
Cliff Beckham, vice president and chief financial officer at USA Truck, called Knight’s move to make its offer known “public shenanigans,” surmising it could be a tactic to put pressure on the board of directors. Beckham said the company is willing to sit down with Phoenix-based Knight and discuss the deal but called the move to make the offer public a distraction as USA Truck tries to get its financial house in order.
“We are not looking to sell,” Beckham said.
Beckham said the board of directors has confidence in the company’s plans to return to profitability and that Knight would face difficulty trying to push for a tender offer without support of the board of directors since the company has the poison pill provision in place. USA Truck implemented a stockholder rights plan in November to avoid hostile takeovers. The poison pill floods the market with new shares of stock when certain conditions are met, making purchasing a large stake prohibitively expensive.
Joshua Henke, managing director for Longnecker & Associates, an executive compensation consulting firm in Houston, said boards of directors initiate poison pills to protect companies from an individual or groups of investors who might want to disrupt companies’ long-term strategy.
He called poison pills internal mechanisms that allow the board to protect the company from opportunistic investors but also to shop for the best deal in the case of a buyout offer. The downside is, it puts all the power to make those key decisions in the hands of a fairly small number of people.
Henke said poison pills are often seen in industries with a good deal of volatility, like transportation - including trucking and aviation.
“It’s an insurance policy of sorts,” he said.
USA Truck transports general commodities throughout the U.S. and parts of Canada and Mexico and as of March had about 3,000 employees, including about 2,320 drivers, according to the company’s 2012 annual report.
The company has had eight consecutive losing quarters, including a record $6.1 million loss in the third quarter of 2012. It reported a net loss of $17.5 million in 2012 and $10.8 million in 2011. The company has not posted an annual profit since 2008.
In July, the company reported losing $1 million for the second quarter, compared with a loss of $3.5 million for the same period last year. At the time, John Simone, USA Truck’s president and chief executive, said the company was continuing to narrow its losses and its turnaround plan seemed to be gaining traction.
Business, Pages 31 on 09/28/2013