Knight-Swift Transportation Holdings has signed a deal to acquire U.S. Xpress Enterprises. This would unite the Nos. 3 and 20 fleets on the FleetOwner 500: Top For-Hire list, creating a carrier with a $10B revenue run rate. The transaction has an enterprise value of $808M, and U.S. Xpress investors would receive $6.15 per share in cash. U.S. Xpress has struggled in recent quarters and launched a restructuring plan to cut $25M in costs per year; the transaction is expected to close around mid-year.

Bringing U.S. Xpress into the fold (retaining its brand) would add $2.2B in revenues and grow Knight-Swift’s top-line run rate to $10B annually. The third-largest for-hire fleet in the U.S. (25,000 vehicles) would add 6,000 from U.S. Xpress. The deal will add to Knight-Swift’s profit/share in 2024.

Knight-Swift CEO Dave Jackson said that although it’ll take time, they can achieve their return thresholds within a few years. U.S. Xpress CEO Eric Fuller and CFO Eric Peterson will leave their roles once the acquisition closes but remain available to help.

Executive Chairman Max Fuller and Eric Fuller have committed to rolling over part of their U.S. Xpress holdings and will own about 10% of the Knight-Swift subsidiary that will house U.S. Xpress.

Knight-Swift Transportation Holdings are set to acquire U.S. Xpress.

Buying U.S. Xpress (noted in red) will fill gaps in Knight-Swift’s network in the Southeast. Knight-Swift was formed in 2017 by Knight Transportation and Swift Transportation, with ~23,000 vehicles. It has since grown to 24,900 vehicles and 24,724 registered trailers (3rd-most of any for-hire fleet).

Jackson and his team aim to lower U.S. Xpress’ operating ratio to the high 80s by 2026, creating a 15% return on invested capital. This will require cost-cutting and implementing Knight-Swift’s systems and best practices.

Knight-Swift applied the same playbook to their combination, and adjusted operating margins rose from 7% in 2017 to over 20% last year. Tim Harrington and Josh Smith (Knight-Swift’s Executive VP of Sales and Senior VP of Finance) will lead the charge post-closing as President and CFO, respectively.

 

Sources: https://www.fleetowner.com/news/article/21262355/knightswift-to-buy-us-xpress-in-800m-deal