Two trucking companies announce merger



Posted on 04/13/2017 by David Radke

Truck

Two major U.S. trucking firms, Knight Transportation and Swift Transportation, announced April 10 their intention to merge operations in an all-stock deal. By joining forces, the companies claim they could improve efficiencies and therefore boost driver pay while serving more customers.

According to estimates cited in the news release, the new company will be known as Knight-Swift Transportation Holdings. Based on financial reports made by the two firms last year, the joint company would weigh in at around $5 billion in annual revenue, operating around 23,000 trucks and employing 28,000 people.

"This is a terrific opportunity for our stockholders, who stand to benefit from the significant upside potential of this transaction," Richard Dozer, the Swift chairman, said in the news release. "Indeed, by coming together under common ownership, the companies will be able to capitalize on economies of scale to achieve substantial synergies."

Upon completion of the stock transaction, the family of Swift founder Jerry Moyes would own approximately 24 percent of the new combined company. Knight executive chairman Kevin Knight would continue in his current role. Swift shareholders would receive 0.72 shares in the new joint company for each original Swift share they currently own. Meanwhile, Knight shareholders would receive new shares at a one-to-one ratio. All in all, Swift shareholders would form the majority of the new ownership at 54 percent, while Knight investors would hold the remaining 46 percent.

Background of the deal

The Swift-Knight merger is no doubt a move to consolidate and regroup after several years of rough seas for some in the trucking industry. The New York Times reported as early as 2014 that Swift had been hammered by a sharp rise in demand for transportation services but a serious lack of drivers able to fill orders. That year, the American Trucking Associations estimated the industry needed 30,000 more qualified drivers than it currently had to meet demand. In 2015, the ATA revised that estimate to 50,000.

Even though trucking companies continue to clamor for qualified employees, driver pay has increased very little. The Bureau of Labor Statistics reported that truck driver salaries had not been rising to match inflation for the last several years. Meanwhile, trucking companies are continually subject to new regulations that bring shorter hours and bigger capital expenses.

As in many other industries, the natural reaction to this challenge is consolidation. By combining forces, companies can theoretically leverage their size and scale to negotiate higher service fees while reducing costs. That should translate into better pay for drivers, too.

"Under this ownership structure, we will be able to operate our distinct brands independently with experienced leadership in place," Dave Jackson, the CEO of Knight, said, according to the news release on the Swift-Knight merger. "We look forward to learning from each other's best practices as we seek to be the most efficient company in the industry."

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