The Daily Deal said this week the government will have trouble proving that there is a separate market for national LTL shipping, in which carriers pick up small shipments and bring them to regional terminals to be packed on a truck with other orders. Even if such a market does exist, analysts said, the entry of new competitors after the Yellow-Roadway tie-up will prevent the merger from harming competition.
And experts interviewed by the Deal said the merger should get approval relatively soon.
Earlier this summer, Yellow Corp. agreed to acquire Roadway in a half-stock, half-cash deal, even though the acquisition seems fraught with problems. Yellow and Roadway are the two biggest players in the LTL business, with $2.6 billion and $3 billion, respectively, in 2002 revenue. The only other major player is Arkansas Best Corp., which had $1.4 billion in 2002 revenue.
Antitrust agencies rarely clear mergers that leave only two competitors in a market -- especially when the company left out of the merger is the smallest player in the business.
But this deal could be the exception, according to the Deal. Sources said the shipping market is undergoing a fundamental change that is eroding the traditional distinctions between different services such as national LTL, regional LTL and package delivery.
A January Morgan Stanley report found that the national carriers have lost 15% to 20% of their tonnage in the past two years, an amount they are not expected to recover even with an economic rebound. In part, that's because companies increasingly use full trucks, which are typically less expensive than LTL, to carry their long-haul goods.
Even if regulators decide there is a separate national LTL market, so many new competitors are entering the market that an enlarged Yellow is unlikely to gain an edge.