Knight-Swift Transportation Holdings says its pending $808 million purchase of U.S. Xpress Enterprises won’t slow down its LTL growth plans.
As part of its announcement of the deal, Knight-Swift emphasized that "this transaction will not slow down the geographic expansion of our LTL network or our other growth initiatives, as our financial and other resources remain significant."
Knight-Swift has been pushing further into the LTL market as part of a diversification strategy, starting with its acquisition of AAA Cooper Transportation in 2021. The segment contributed nearly 12% of Knight Swift’s operating income last year, coming in at $126.6 million.
"I think people were looking for them to do more deals and keep building out their nationwide footprint," said Bert Subin, VP of Trucking, Logistics and Government Services at Stifel. "And I think what they're saying is, you know, we still will have plenty of access to capital."
Subin said the U.S. Xpress TL acquisition takes a large LTL deal out of the equation for Knight-Swift, but the company may look to make smaller deals as it seeks to further expand its national footprint. Speaking about M&A deals, Knight-Swift President and CEO David Jackson said on a January earnings call that the carrier’s number one priority is LTL.
The pending U.S. Xpress deal also signifies that the current market conditions may be ripe for other mergers and acquisitions, said Spencer Tenney, president and CEO of the transportation M&A advisory firm The Tenney Group.
Soft freight environments tend to highlight carriers' strengths and weaknesses — including any inabilities to grow organically, Tenney said. His firm has 17 deals currently in the pipeline, several of which are expected to close in the next 30 days.
"What the transaction does is it gives confidence to the rest of the folks, and it probably gives them clarity, about what they need to be doing to ensure that they are building sustainable businesses that can function at a high level, regardless of what's happening in the freight market," Tenney said.