Truckload carrier Knight-Swift Transportation Holdings Inc. has added another asset to its portfolio, announcing Wednesday that it had closed the previously announced, $808 million acquisition of U.S. Xpress Enterprises Inc.
Initially announced on March 21, completion of the deal followed an approval vote by U.S. Xpress’ shareholders on June 29. Upon completion of the transaction, U.S. Xpress was de-listed from the New York Stock Exchange (NYSE).
For its purchase price, Knight-Swift is expected to gain some 7,200 tractors and 14,400 trailers generating approximately $2.2 billion in revenue. That addition would bring Knight-Swift to a total of 25,000 tractors and 93,000 trailers generating some $10 billion in revenue.
The move is Knight-Swift’s latest step to reach its vision of building out a nationwide less-than-truckload (LTL) network. In 2021, Phoenix-based Knight-Swift paid $150 million to likewise add capacity by purchasing Midwest Motor Express Inc. and Midnite Express Inc. (which were known collectively as MME). And earlier that same year, Knight-Swift acquired the LTL carrier AAA Cooper for $1.35 billion.
But even as the company made its latest addition, Knight-Swift leaders warned yesterday that their second-quarter financial results would be less than expected. “This decline in operating performance is largely driven by the full truckload market, where persistently soft demand has caused volumes and pricing to be under greater pressure than originally anticipated, while costs remain stable on a sequential basis,” the company said in a release.
The gloomy assessment is the latest evidence of an ongoing freight recession that may not begin to turn around until early in 2024, experts say. Some measures indicate that the trucking sector is nearing the bottom of that cycle, but in the meantime, retailers and manufacturers will continue to enjoy the upper hand in the cyclical see-saw between shippers and carriers.
Still, Knight-Swift CEO Dave Jackson celebrated the close of the deal. “Against the current backdrop of a particularly difficult business environment, the chance to add one of the largest brands in our industry, with significant opportunity to improve earnings, gain customers and reach more professional drivers, is a compelling part of our plan to drive higher highs and higher lows across successive truckload freight cycles,” Jackson said in a release. “As we have engaged with more of the U.S. Xpress organization since the announcement, we have even more confidence that our combined efforts will lead to achievement of the profitability targets we communicated. Our cross-functional synergy teams made up of leaders from Knight, Swift, and U.S. Xpress are off to a great start collaborating on plans to share best practices, improve operations, and leverage economies of scale – and now they have the green light to fully engage. While the truckload part of the organization focuses on achieving the goals we have laid out for U.S. Xpress, our LTL and M&A teams remain focused on our strategic priority of continuing to build out a nationwide LTL network.”