A “creeping hostile” takeover attempt by Knight Transportation to acquire Van Buren-based USA Truck became even less friendly on Thursday (Oct. 10) when USA Truck officials filed a breach of contract lawsuit against Knight.
The lawsuit, filed in Crawford County Circuit Court, accuses Knight officials of “improperly using USA Truck's confidential information to begin a creeping hostile acquisition of USA Truck at a price that the Board has unanimously concluded does not reflect the Company's full intrinsic value.”
Knight has not responded to the lawsuit and USA Truck claims.
Knight made public its bid for USA Truck on Sept. 26. The $9 per share bid at the time was a 39% premium from USA Truck’s share price on Sept. 25, and a 58% premium compared to the Aug. 27 closing price – the day before Knight sent its first proposal letter to the USA Truck Board of Directors. The share purchase and assumption of liabilities creates a $242 million deal.
Officials with Knight then announced Sept. 30 they had increased from 8% to 11.3% (1,192,364 shares) their ownership of USA Truck shares, and claimed that “several” large shareholders groups supported Knight’s $9 per share offer for USA Truck. On Oct. 1, Knight acquired more shares, boosting its ownership of USA Truck closer to 1,287,782 shares.
The USA Truck management and Board of Directors have said the Knight offer “substantially undervalues” the company and does not reflect the value of potential gains from ongoing turnaround initiatives.
USA Truck has reported four consecutive years of losses. During the first half of 2013, the company reported a loss of $3.5 million, better than the $8.4 million in the same period of 2012.
The following statement was issued by USA Truck in conjunction with announcing the legal action:
“USA Truck's Board of Directors is very disappointed that Knight is doing exactly what it promised not to do: use confidential information that it was provided in the context of friendly and private discussions regarding a negotiated transaction between the companies to initiate a creeping hostile takeover of USA Truck at a price that does not reflect the full intrinsic value of USA Truck. As stated in the Company's release dated September 26, the Company has previously offered to meet with Knight and remains open to all strategic options that reflect the full intrinsic value of USA Truck, including further discussions with Knight.”
USA Truck alleges in the lawsuit that Knight used information gained in confidential discussions to buy USA Truck shares in an attempt to pursue the takeover without negotiating with the USA Truck Board of Directors.
Moelis & Company and Little Rock-based Stephens Inc. are acting as financial advisors to USA Truck and Latham & Watkins LLP and Kutak Rock LLP are acting as USA Truck's legal advisors.