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New Merger on the Horizon in the North American Trucking Industry

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Part 2
New Merger on the Horizon in the North American Trucking Industry PART 2 OF 5

Exploring the Deal Between Swift and Knight Transportation

The deal

The announced deal between Swift Transportation (SWFT) and Knight Transportation (KNX) brings together two major truckload operators. Their stock swap merger is poised to create a $5.0-billion-plus empire in the US trucking space.

Exploring the Deal Between Swift and Knight Transportation

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Deal details

The deal between Swift and Knight Transportation was announced on April 10, 2017. According to the deal, each Swift Transportation share would be converted into 0.72 shares of the new transport company by way of a reverse stock split. Knight Transportation’s shares would be exchanged one-for-one. In the new entity, Swift’s shareholders would own 54%, and Knight’s shareholders would own the remaining 46%.

The name of the new entity will be Knight-Swift Transportation. Note that even though this is a merger, the identities of each company’s operations and brands will be distinct.

Valuation

The deal between the two Phoenix-based transportation majors values SWFT shares at $22.0. This valuation indicates a ~10% premium to its closing price on April 7, 2017.

On April 11, 2017, Swift’s market value stood at $3.9 billion, whereas KNX’s was $3.0 billion. The combined company is expected to have an implied enterprise value of nearly $6.0 billion. Note that Knight is expected to be the accounting acquirer in the proposed transaction. Swift will be the legal survivor with revised governance.

Management’s input

Knight Transportation’s executive chair, Kevin Knight, said, “We had four goals in mind: create a company with the best strategic position in our industry; identify significant realizable synergies that would create value for both sets of stockholders; create a business that over the long-term will operate at Knight’s historical margins and financial returns; and agree on a leadership and corporate governance framework that will benefit all stakeholders. I am confident we have achieved those goals.”

Related ETFs 

Transportation and logistics companies make up part of the industrial sector. Major railroad companies (UNP) and airlines (DAL) in the United States represent 6.2% and 4.8%, respectively, of the iShares US Industrials ETF (IYJ).

In the next article, we’ll take a look at the story behind Knight-Swift Transportation.

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