Knight-Swift to Acquire U.S. Xpress

One of the largest asset-based truckload fleets in North America, Knight-Swift Transportation, announced plans to acquire U.S. Xpress for approximately $808 million. The acquisition is expected to be complete late in the second quarter or early third quarter of 2023.

Knight-Swift’s acqusition of U.S. Xpress is expected to add:

• Approximately $2.2 billion in total operating revenue (including $1.8 billion in truckload revenue).
• 7,200 tractors.
• 14,400 trailers.

“The opportunity to add one of the largest and most well-known brands in our industry, with significant opportunity to improve earnings, gain customers and reach more professional drivers, was very compelling to us,” Knight-Swift CEO Dave Jackson said in a press release.

After the transaction, Knight-Swift’s consolidated revenue run-rate is expected to approach $10 billion. The truckload fleet will have approximately 25,000 tractors and 93,000 trailers.

“Although it will take time, particularly given the current freight environment, we would not have pursued the transaction unless we were confident in achieving our return thresholds within a few years,” Jackson said. “Beyond that, we will continue to work with the U.S Xpress team in pursuit of the performance levels of our other truckload businesses over the next several years, so the opportunity for our stockholders is substantial.”

In an investor presentation, Knight-Swift explained that this was a rare opportunity to acquire a company of this scale, in a sector where the carrier already has proven competence. There is limited opportunity for organic growth in the current truckload environment, so Knight-Swift's strategy is to grow by acquiring companies, operating them more efficiently, and using its strong free cash flow to pay down acquisition debt.

Company officials said the 2017 Knight merger with Swift has been highly successful and provides a general guideline of what it expects to achieve with U.S. Xpress.

U.S. Xpress’ Recent Financial Challenges

The total enterprise value of $808 million for U.S. Xpress represents Knight-Swift assuming U.S. Xpress’ $484 million of outstanding debt and finance leases and purchasing its outstanding equity for $324 million, or $6.15 per share, and excludes its $336 million of operating lease liabilities.

U.S. Xpress saw a net loss of $9.5 million in the first six months of 2022, and realigned the company later that year. On Sept. 7, 2022, the Chattanooga, Tennessee-based truckload carrier announced it was rolling the Variant fleet — a digitally dispatched/managed, driver-focused fleet — into its legacy over-the-road operations as part of the realignment and cost-cutting designed to bring it back to profitability. 

What Will Happen to U.S. Xpress When Aquired by Knight-Swift?

After the closing of the transaction, U.S. Xpress will continue as a separate brand and operation to minimize disruptions to drivers, other employees and customers. At the same time, cross-functional teams made up of leaders from Knight, Swift, and U.S. Xpress will work together to "leverage economies of scale, freight network efficiencies and best practices," company officials said.

“The increased scale, operating expertise and resources of the combined entity will allow U.S. Xpress to pursue new levels of service and efficiency,” U.S. Xpress CEO Eric Fuller said.

Max Fuller, executive chairman of U.S. Xpress, Eric Fuller and related entities will have a continuing economic interest and be aligned with Knight-Swift to foster ongoing relationships with key customers and vendors, and maintain other important business relationships, according to the press release.

Through closing, U.S. Xpress will continue to be led by its current senior management. At closing, the Fullers, along with CFO Eric Peterson, will transition out of their executive officer roles while remaining available to ensure a smooth transition.

Tim Harrington and Josh Smith, both executives at Swift, will join U.S. Xpress as president and CFO, respectively.

Is Knight-Swift Still Focused on LTL?

While the U.S. Xpress deal creates a mega truckload fleet, Knight-Swift entered the less-than-truckload market in 2021, and earlier this year Knight-Swift 's CEO Jackson told investors LTL was the company’s top priority. He said the acquisition of U.S. Xpress “will not slow down the geographic expansion of our LTL network or our other growth initiatives, as our financial and other resources remain significant.”