Knight-Swift Enters LTL Market with Purchase of AAA Cooper

Knight-Swift Transportation is getting into the less-than-truckload business with the acquisition of AAA Cooper, diversifying into a part of trucking that is historically less volatile than its traditional truckload business.

Knight-Swift Transportation Holdings Inc. announced July 6 that it has acquired 100% of Dothan, Alabama-based AAA Cooper Transportation. In addition to LTL, AAA Cooper offers dedicated contract carriage and ancillary services.

“We have long had interest in the LTL space and admired the success of AAA Cooper,” said Knight-Swift CEO Dave Jackson in a news release.

Similar to previous acquisitions, AAA Cooper will continue to operate independently. Reid Dove will continue to be the CEO of AAA Cooper and has been appointed to the Knight-Swift board of directors.

The move helps further diversify Knight-Swift revenues. Previously, more than three-quarters of its revenues came from its trucking operations, 10% from intermodal and 9% from logistics as of 2018, according to an investor presentation. LTL will become the second largest segment for Knight-Swift, at 14%, followed by logistics and intermodal. Non-truckload trucking revenue as a percent of total expected revenue has increased from 22% to 37%.

The less-than-truckload market is less fragmented and not as volatile as the truckload market, the company noted. In addition, it said, the LTL sector is well-positioned for supply chain trends toward forward-positioned inventory and e-commerce.

"In seeking our first LTL partner, we had three main requirements – the scale for entry with significant market share, the profitability and management depth to operate independently and provide a platform for compelling growth opportunities, and a world class culture,” Jackson explained. “This transaction firmly positions us as a meaningful player in the LTL space, where we intend to grow both organically and through future acquisitions."

AAA Cooper, founded in 1950, has approximately 70 service centers across the Southeast and into the Midwest. Nationwide service is provided through affiliations with other regional and national LTL companies. AAA Cooper’s fleet includes nearly 3,000 tractors and 7,000 trailers, with an operating ratio in the high 80’s to low 90’s.

The enterprise value of the transaction was $1.35 billion. The purchase price consisted of $1.3 billion in cash, $10 million in Knight-Swift shares, and approximately $40 million in assumed debt, net of cash. Cash for the transaction was funded from a new $1.2 billion term loan provided by Bank of America to Knight-Swift, as well as existing Knight-Swift liquidity.