Shareholders of USA Truck are warming to the possibility of an acquisition by Knight Transportation, a proposal USA Truck’s management previously rejected, according to Knight management.
On Monday, Knight Transportation also made public that it had purchased
more than 362,000 shares since the company disclosed its proposal. Knight now owns 1,192,364 shares of USA Truck, which
equates to 11.3 percent of the company. At the time of the initial
proposal, Knight owned 8 percent of USA Truck.
The company said several USA Truck shareholders have expressed support for the deal — which would net shareholders $9 per share for a total offer of $242 million — that Knight made public on Thursday.
“We are disappointed that USA Truck has once again rejected Knight’s all-cash, premium proposal,” Knight Transportation said in a statement. “Since making our proposal public, we have had discussions with several of USA Truck’s largest shareholders that have indicated their support for our proposal and have encouraged us to continue to take the necessary steps to acquire USA Truck. We continue to believe that a combination of Knight and USA Truck is better positioned to deliver value for and is in the best interest of all of Knight and USA Truck’s stakeholders, and we are prepared to take the necessary steps to make this combination a reality.”
After Knight released its proposal to the public, USA Truck issued a statement that the acquisition deal "substantially undervalues" the company.
“The company offered to meet with Knight to discuss the reasons why the company viewed Knight’s proposal as inadequate. Surprisingly, on Sept. 13, 2013, Knight rejected the company’s offer to meet and informed USA Truck that it saw no point in engaging in further transaction discussions with USA Truck at that time,” it said in the statement, released late Thursday.
“While the company remains open to all strategic options,” it continued, “including further discussions with Knight, we believe that executing our strategic plan will offer superior value to our shareholders.”
In an investor guidance email, Cowen and Co. said while Knight’s acquisition may be beneficial in the long-term, if a hostile takeover occurs, it could face some initial challenges.
“Considering over 17 percent of shares are owned by two founding insiders who appear opposed to the deal … and in light of [USA Truck’s] heated response and firm rejection of the current offer price, we believe (Knight Transportation) will not have the easiest of times trying to carry out a friendly merger and may find itself resorting to a hostile takeover,” Cowen wrote.
“We continue to view (Knight) favorably,” Cowen continued, “and are encouraged by the company's decision to finally pull the trigger on a major acquisition attempt. That said, we would not be surprised if the stock pulls back a little in the coming days while the parties contemplate their plans of action.”
On Sept. 6, USA Truck’s board rejected Knight’s Aug. 28 proposal as "inadequate and indicated that ‘the company is not for sale,’” according to a Sept. 26 filing with the Securities and Exchange Commission. “In light of USA Truck’s negative response, Knight Transportation communicated to USA Truck that Knight Transportation saw no merit in engaging in discussions directly with USA Truck management.”