Yellow Reported Courting USF, Further Union Carrier Consolidation Could Result

The Wall Street Journal reported yesterday that Yellow Roadway Corp. was in discussions USF Corp. on a possible acquisition of that company.

The Journal cited an unnamed source "familiar with the matter" and said Yellow wanted to acquire USF in a deal potentially worth more than $1 billion.
Yellow bought its former chief rival, Roadway Express, in 2003 and renamed itself Yellow Roadway. A similar merger with USF would further consolidate the LTL sector, and more pointedly, the remaining unionized LTL carriers. The LTL landscape would begin to resemble the package sector where unionized UPS competes with various units of non-union (at least on the ground) Fedex. Fedex’s Fedex Freight operation would compete with a Yellow USF in some markets along with large non-union carriers like Overnite and Old Dominion.
However, a successful acquisition of USF’s operating units could help Yellow Roadway in regional and overnight markets. Perhaps coincidentally, Yellow Roadway's Yellow Transportation unit said in a press release Wednesday that its newly launched next-day service has achieved a 98% on-time performance. Yellow's initial next-day service spans an area extending from Wisconsin through upstate New York and from northern Michigan into Tennessee. The company said it will expand its next-day service offerings.
Analysts commented on the Yellow USF story Wednesday through various news outlets, including the Associated Press and Reuters. Some criticized the possible merger, but by the end of the day Yellow shares closed up $2.60, or 4.7 percent, to $57.95. USF shares rose $4.37, or 13.1 percent, to $37.73.
Yellow and officials would not comment on the report. The Associated Press said that USF officials couldn’t be reached.