Swift/Knight Acquires USX

Knight-Swift to buy Chattanooga-based U.S. Xpress for $808 million

U.S. Xpress Enterprises, Chattanooga's biggest trucking company, is being acquired by Knight-Swift Transportation Holdings Inc. for $808 million, or more than triple the current stock value of the company.

The Phoenix, Arizona-based Knight-Swift, one of North America's largest motor carrier holding companies, announced its purchase of U.S. Xpress on Tuesday and said it expects to close the sale by late in the second quarter or early in the third quarter of 2023. U.S. Xpress stockholders will receive the equivalent of $6.15 per share, or a 310% premium over U.S. Xpress' closing stock price on Monday of $1.50 per share.

Wow, the big just keep getting bigger

I glanced at some numbers. US Xpress went public back in 2018 while having a decent year. They made small amounts of profit in 2019 - 2021 but lost more money in 2022 than they made in the previous three years combined. Their cash on hand was less than 1% of their liabilities, which almost equaled their assets. Their operating income went negative in 2022.

In other words, they would have gone bankrupt soon. They were basically insolvent, and almost out of cash.

Eric Fuller, the son of founder Max Fuller, took over as CEO in 2017 and immediately took the company public. He said at the time:

We were an entrepreneurial, growth-oriented company for a long time. But when I went into my role (as president and later CEO) I tried to shift the focus to a more professionally managed organization that makes decisions based upon metrics and data and we’ve tried to build a strong culture for success.”

Fuller said changes in management, technology and culture, which are ongoing, have helped restore profitability to U.S. Xpress and the improving economy and economies of scale should sustain that growth.

The stock issue pays down much of the company’s debt and allows U.S. Xpress to own, rather than lease, its Tunnel Hill, Ga., facility.

“That will dramatically change our leverage and be transformative in positioning us for the future,” Fuller said.

They raised $250 million in their IPO in 2018, but burned through it and then some in the next few years.

Unfortunately, this is a very common story. Very few businesses survive after being taken over by the next generation.

I worked for US Xpress for the last 6 years of my OTR career. I ran local for a year or so after that. They were a great company, owned by a family who genuinely cared about their employees. There were rough patches and a few bad apples like there are at any large company, but overall a great company.

This is a nice acquisition for Swift-Knight.

Wow, the big just keep getting bigger

I don't have many statistics at the moment, but I've looked them over in the past. The trucking industry is one of the most fragmented industries on the planet. When compared to the media, the airlines, auto manufacturing, and almost all other industries, you'll find that there are no 'big players' overall when compared with the size of the industry.

You can take the 10 largest irregular route carriers in the industry, and I don't think they comprise 5% of the trucks on the highway.

According to the article quoted today, this acquisition gives Swift-Knight somewhere around 25,000 tractors. There are somewhere around 3 million trucks on the road, so Swift-Knight isn't even 1% of the trucks on the road today, and that's after acquiring US Xpress. That's pretty incredible when you compare that to other industries.

We will see many more acquisitions and bankruptcies in the coming months and years. I think the downturn has only just begun. The Feds had to step in to stop the complete collapse of our banking industry, after two of the three largest bank bankruptcies in history in a one-week period.

Oversees they had to sell Credit Suisse, or that probably would have taken down half the banks on the planet.

Things are far worse than our government admits. Shocking, right?

I wanted to mention something quick. Most second-generation businesses fail. The number is somewhere around 75%.

Look again at the quote from Eric Fuller, the son who took over the company:

We were an entrepreneurial, growth-oriented company for a long time. But when I went into my role (as president and later CEO) I tried to shift the focus to a more professionally managed organization that makes decisions based upon metrics and data and we’ve tried to build a strong culture for success.”

In other words, my dad started from scratch in 1986 and grew the company to over 7,000 trucks in 30 years. However, the company wasn't 'professionally managed' and didn't make decisions 'based on metrics and data' and didn't have a 'strong culture for success'.

A little over four years later and they went belly up. I don't think I would have been too happy with the statement my son made a few years back, and I think the results speak for themselves.

It seems the main reason they went public in 2018 was to buy out Max Fuller and Pat Quinn, the company founders.

808 million sounds like a lot of money. It is a lot of money, but look at what the Shareholders are getting per share. That's a ridiculously low price for a public company of that size. Brett is spot on when he says insolvency was just ahead for U S. Express.

Business can be cutthroat. This has been a strategy at Knight for many years. They will buy distressed companies at discount prices and then get them back to solid fundamentals. This one will be challenging, but they know how to weather these transitions. They have transition teams ready to dig in and do the hard work.

U.S. Express has just been managed terribly the past four or five years. Anybody paying attention to the trucking markets has noticed their spiral toward an imminent demise. Hopefully KNX holdings can revive this once solid company and make it vibrant again. I hope it turns out well.

I wanted to mention something quick. Most second-generation businesses fail. The number is somewhere around 75%.

Look again at the quote from Eric Fuller, the son who took over the company:

We were an entrepreneurial, growth-oriented company for a long time. But when I went into my role (as president and later CEO) I tried to shift the focus to a more professionally managed organization that makes decisions based upon metrics and data and we’ve tried to build a strong culture for success.”

In other words, my dad started from scratch in 1986 and grew the company to over 7,000 trucks in 30 years. However, the company wasn't 'professionally managed' and didn't make decisions 'based on metrics and data' and didn't have a 'strong culture for success'.

A little over four years later and they went belly up. I don't think I would have been too happy with the statement my son made a few years back, and I think the results speak for themselves.

It seems the main reason they went public in 2018 was to buy out Max Fuller and Pat Quinn, the company founders.

You beat me to this factoid, Brett!

This is suprising, did they sell of Variant along with it??

I’ve seen this same type of thing over the years alot. I’ve personnally known 3 in my time and all 3 shared a commonality. The kids never had to work hard to build the company. Each had taken over an established well run business. They didn’t have the sense of it being something they built. Their loyalty and buy-in wasn’t the same.

Of course the younger ones always think they know more than their parents, always been that way and always will be.

did they sell off Variant along with it??

Yes, Variant is included in this deal.

There are many that criticize knight but the fact remains that they know how to run a profitable and successful trucking company. It doesn't come as a surprise to me at all.

The trucking market has been dramatically over capacity meaning far too many trucks and carriers due to 2021 and 2022 The fallout will continue until levels are corrected. The rates will go back in balance. For company drivers, that means freight will steadily increase but it will take a while

There are many that criticize knight but the fact remains that they know how to run a profitable and successful trucking company. It doesn't come as a surprise to me at all.

The trucking market has been dramatically over capacity meaning far too many trucks and carriers due to 2021 and 2022 The fallout will continue until levels are corrected. The rates will go back in balance. For company drivers, that means freight will steadily increase but it will take a while

Sounds like a good time to be a company driver. Glad that I was able to get in when I did.