Knight-Swift Agrees to Buy U.S. Xpress for About $808 Million

On March 21, 2023, Knight-Swift Transportation Holdings announced an agreement to acquire U.S. Xpress Enterprises for approximately $808 million. U.S. Xpress shareholders were to receive $6.15 a share, compared with the Chattanooga, Tennessee-based carrier's closing price of $1.50 the day before, FreightWaves reported.

The deal

According to the companies, U.S. Xpress would add about $2.2 billion in total operating revenue, 7,200 tractors and 14,400 trailers. Knight-Swift said its consolidated revenue run rate would approach $10 billion and that it was targeting an adjusted operating ratio in the high 80s for the acquired business by 2026. The transaction was expected to close around midyear.

U.S. Xpress would continue as an independent brand to minimize disruption for its workforce and customers, Transport Topics reported. CEO Eric Fuller, Executive Chairman Max Fuller and CFO Eric Peterson planned to step down when the deal closed. Swift executive Tim Harrington was to become president of U.S. Xpress and Josh Smith, also from Swift, its CFO. The Fuller family would roll part of its shares into an approximately 10% interest in a new Knight-Swift subsidiary holding the U.S. Xpress business.

"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. "We expect to apply the same playbook that proved successful in the Knight-Swift merger as we share best practices, improve operations and work together to help U.S. Xpress become the best that it can be."

Two very different carriers

FreightWaves noted the gap in performance between the two companies. Knight-Swift had an adjusted operating ratio of 83.5% in 2022, while U.S. Xpress posted 101.2%, meaning its expenses exceeded revenue. U.S. Xpress had spent more than two years on Variant, a technology-driven unit with its own pay structure, which did not produce the turnover improvement the company had hoped for.

Deutsche Bank analyst Amit Mehrotra wrote that "USX is a money losing business and risks to integration are not zero," but added that after the larger Swift integration, Knight-Swift management "should get the benefit of doubt in being able to achieve the financial targets."

Knight-Swift ranked No. 7 and U.S. Xpress No. 23 on the Transport Topics Top 100 list of for-hire carriers.

What it means for drivers and fleets

For U.S. Xpress drivers, the companies' plan to keep the brand and operate it as a separate division signaled continuity in the near term, with new leadership drawn from Swift and a mandate to improve profitability. Knight-Swift's stated goal of bringing the unit to a high-80s operating ratio by 2026 pointed to operational changes ahead.

For the wider truckload market, the March 2023 deal showed a large, profitable carrier using a soft freight market to buy scale. Smaller fleets competing for the same contract freight faced a bigger rival with roughly 25,000 tractors in its combined truckload fleet, according to FreightWaves.