Carriers at odds cut deal, end suit

USA Truck pact restrains Knight

USA Truck has agreed to settle a breach-of-contract lawsuit it filed against Knight Transportation in October.

As part of the settlement, Knight, which has expressed interest in acquiring USA Truck, will not admit to any wrongdoing and has agreed to stipulations that will accompany its continued ownership of its 12.4 percent stake in the Van Buren-based carrier. Knight and USA Truck announced Tuesday that they’ve entered into “voting” and “standstill” agreements.

Knight, under the standstill agreement, will not acquire USA Truck securities or assets between now and Sept. 30, nor will Knight seek representation on the USA Truck board of directors.

Terms of the two agreements were released by the companies Tuesday. Representatives for Knight and USA Truck were unavailable for additional comment on the settlement. The lawsuit, set for an April 14 hearing in U.S. District Court for the Western District of Arkansas, Fort Smith Division, was dismissed with prejudice.

Knight, according to the voting agreement, will not vote or influence selections to the board of directors and other actions during any shareholders meetings held through Sept. 30. Ordinarily, Knight’s 1.3 million shares would entitle the Phoenix based trucking and transportation company a say in USA Truck operations.

USA Truck filed the breach of-contract lawsuit against Knight on Oct. 10. In the lawsuit, USA Truck sought the return of nearly 400,000 recently purchased shares and alleged that Knight increased its stake in the company by using insider information. Executives for the two trucking companies had been engaged in talks about a possible merger off and on for the past two years, and USA Truck felt Knight broke a confidentiality agreement by making their talks public.

In the event USA Truck proposes to enter into an agreement with another interested buyer, Knight will be given “a reasonable opportunity to participate” in a decision pertaining to the proposal. Knight agreed to vote all of its shares in favor of a sell if the value of the outside offer exceeds Knight’s “most recent proposal to acquire USA Truck.”

Knight’s most recent public proposal was a $9 per share offer in September as part of a deal valued at $242 million. Knight and USA Truck have each expressed a desire to further discuss a merger, but it is unclear whether Knight has increased its initial offer.

During a call last Wednesday with investors, Knight Transportation CEO Kevin Knight said the company had a $300 million line of credit available to pursue acquisitions.

“Hey, if the right opportunity presents itself, we’re not going to be afraid to step up and close,” Knight said. “If we have unrealistic sellers, we’ll focus on growing internally.”

As part of the standstill agreement, Knight will not encourage or knowingly assist in an acquisition or merger attempt related to USA Truck. Plus, Knight agreed not to participate in “any recapitalization, restructuring, liquidation or other extraordinary transaction with USA Truck.”

USA Truck also stipulated that Knight cannot directly influence the board of directors and management of USA Truck or do so through a third party. Should Knight’s stake in USA Truck fall below 5 percent - the threshold for filing with the Securities and Exchange Commission - it would be permitted to make shareholder proposals in certain circumstances.

Currently, Knight is the third-largest shareholder of USA Truck with 1.2 million shares. Investment firms are the two largest shareholders.Stone House Capital of New York reported ownership of 1.55 million shares, or 14.7 percent of USA Truck stock. Baker Street Capital of California owns 1.4 million shares.

USA Truck is expected to announce its fourth-quarter financial results this month. The company posted its best quarter since 2011 by cutting its third-quarter losses to $602,000 compared with $6.1 million in the corresponding 2012 quarter.

Business, Pages 25 on 02/05/2014

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