Knight, Swift to merge, create largest truckload carrier in U.S.

Under terms of the announced merger, both Swift Transportation and Knight Transportation will continue to operate as separate brands.

Under terms of the announced merger, both Swift Transportation and Knight Transportation will continue to operate as separate brands.

In a stock swap valued at $6 billion, truckload operators Knight Transportation and Swift Transportation have agreed to a merger. The new company, Knight-Swift Transportation Holdings, will have approximately 23,000 tractors, 77,000 trailers, 28,000 employees and control approximately 5% of the nation’s truckload market.

Swift is the No. 2 truckload carrier in the Transport Topics Top 100 in terms of revenue with $4.2 billion in 2016. Swift shareholders will receive 0.72 shares of Knight-Swift stock through a reverse stock split while Knight shareholders will receive one share of the combined company based on Knight’s $30.65 closing price on April 7, 2017.

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Swift stockholders will own 54% of the company. The new company, Knight-Swift Transportation Holdings, will trade under the ticker KNX after the closing of the deal, expected in the third quarter.

In a statement, the companies said the Knight-Swift holding company, while operating under common ownership, will maintain distinct brands and operations. It will be headquartered in Phoenix, AZ, where both companies are based.

Shares of Swift were up more than 20% in early-morning trading. Knight shares have also climbed this morning, up more than 10% as the markets have reacted positively to the news.

“In Knight’s 26-year history, we have built a truckload company with industry leading margins and investment returns,” Kevin Knight, Knight executive chairman, said in a statement. “When the two companies began discussions, 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.”

Combined, Knight and Swift have revenues of approximately $5.1 billion. The board of directors will include all current Knight directors and four Swift directors. Kevin Knight will serve as Executive Chairman of the Board and Gary Knight will serve as Vice Chairman.

Dave Jackson will be CEO and Adam Miller CFO of the new entity. Following completion of the transaction, Kevin Knight will serve as president of the Swift operating entities. Swift founder Jerry Moyes will serve as a non-employee senior advisor to Kevin and Gary Knight and a member of the board.

Richard Stocking, CEO of Swift, and Ginnie Henkels, CFO of Swift, will depart following a transition period.

“I am proud of all Swift has accomplished and that it will be a significant part of this new venture, which brings together the most robust, respected and reliable truckload providers in North America,” said Stocking. “I am especially proud of the fact that both companies will remain devoted to delivering a better life to employees, customers, and communities. Throughout this transition, I encourage everyone to work together to continue building the Swift brand.”

“Effectively, this deal represents the pupil acquiring the teacher's company and will give the Knight team control of the new entity,” said John Larkin, managing director of Stifel & Nicolaus in a research note. “Former Chief Operating Officer, Kevin Knight, will be in a strong position to provide strategic leadership of the combined entity. Mr. Knight is known as one of if not the best operator in the truckload industry and we believe will add some operating discipline and strategic direction to the Swift organization.”

In 2014, Knight Transportation acquired Barr-Nunn Transportation for $112 million. That company continues to operate as a separate brand.

The Knight-Swift combination could be a result of the Schneider National initial public offering last week (IPO), says Larkin.

“The combination is announced in the aftermath of the completion of the Schneider IPO last week and may be designed to allow the combined company an opportunity to better compete with its newly, financially invigorated, big orange perpetual motion machine from Green Bay, WI,” he said.

While transportation mergers were strong in 2015, they cooled in 2016, but that was expected to change this year, Larkin told in the fall.

“I expect it to heat up again as conditions in the truckload sector improve,” Larkin told the publication in September. “And we may start to see conditions improve in 2017.”