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USA Truck removes poison pill provision ahead of annual meeting (Updated)

story by Michael Tilley
mtilley@thecitywire.com

Editor's note: Story updated with comment from USA Truck CEO John Simone.

Officials with Van Buren-based USA Truck Inc. have pulled the plug on their poison pill provision now that a hostile takeover attempt is far in the rear-view mirror and the company’s share price continues to push toward a more historic trading range.

In a statement issued early Thursday (April 10), USA Board Chairman Robert Peiser said a “Stockholders’ Rights Plan” approved in November 2012 had served its purpose by protecting the company during a vulnerable time so the company could “ execute our turnaround without unnecessary distractions, including unsolicited and inadequate takeover offers.”

The remainder of Peiser’s statement noted: "Over the past 18 months, under the leadership of President and CEO John Simone, we expanded our senior management team and began capitalizing on USA Truck's blue-chip customer base, dedicated employees and substantial assets. With the turnaround well underway, and with our stock price having appreciated well above the price existing at the time of the Plan's adoption, the Plan has served its intended purpose. The Board's decision to terminate the Plan demonstrates our confidence in the Company's management team, ongoing strategy and employees."

USA Truck hired John Simone in February 2013 to design and implement a turnaround plan for a trucking company had posted four consecutive years of losses. Simone has more than 30 years of experience in the industry. He’s worked with freight companies such as UPS, Ryder, and Greatwide Logistics. Most recently, he was the CEO of LinkAmerica. 

Enacted in November 2012, the sought to block a company or individual from owning more than 15% of USA Truck shares. The plan – essentially a poison pill provision – also put in place a 10-day “redemption period” to give USA Truck officials “the opportunity to negotiate” with anyone who seeks to buy shares beyond the 15% cap.

USA Truck survived a late 2013-early 2014 hostile takeover attempt by Phoenix-based Knight Transportation in which the poison pill plan did prevent Knight from acquiring enough shares to force the acquisition. Before Knight and USA Truck agreed on Feb. 4 to a standstill in the takeover action, Knight held 11.3% of USA Truck shares (NASDAQ: USAK).

Brad Delco, a transportation industry analyst with Little Rock-based Stephens Inc., said the USA Truck Board decision makes sense.

“It is probably a prudent move for the Board to acknowledge that the use of the poison pill served its purpose, and now they see an ability to go forward with a management team that is having some success in its turnaround effort, and the stock is at a price that they don’t think it could essentially be stolen at an unfair value,” Delco explained.

Stephens Inc. has a market position USA Truck, and does investment and non-investment business with the company.

The value of the company plummeted in 2012 when the share price hit a low of $2.80 on Nov. 6, 2012. Following the September 2013 takeover push by Knight, USA Truck shares have steadily risen, and closed on Wednesday (April 9) at $15.82. The market appeared to like removal of the poison pill provision. Share prices in early morning trading set a new 52-week high of $16.99, and the price moderated to around $16.60 by early afternoon.

The plan allowed shareholders the right to “extinguish” the plan during the 2014 annual meeting. Historically, poison pill plans have not been popular with the large institutional investors that often own a large percentage of a company’s equity. By removing the provision before a shareholders’ vote, USA Truck management avoids a shareholder vote on the issue at the upcoming shareholders’ meeting.

Simone acknowledged that the provision “likely” would have been voted down, but added that the provision worked as it was supposed to by preventing the company from being acquired when the stock price was so low.

“The move is a sign of the confidence in our turnaround,” Simone told The City Wire. “This is a textbook case for how the pill is designed to work. ... We still have a lot of work to do, but the plan is working and the stock price has reacted.”

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Large shareholders remain interested in what’s next for USA Truck. South Africa-based Stone House Capital, which owns 14.7% of USA Truck shares, has been in direct talks with “with senior management and members of the board of USA Truck regarding various matters related to the company, including discussions regarding the its operations, business, strategies and strategic direction,” the investment company noted in a federal filing.

The company said the ongoing discussions “have reviewed, and may continue to review, options for enhancing shareholder value through various strategic alternatives, including highlighting and maximizing the value of Strategic Capacity Solutions, the USA Truck's freight brokerage division, capital allocation, and general corporate matters.”

Although metrics have improved for the company in recent quarters, USA Truck still posted a net loss of $9.11 million in 2013. While an improvement compared to the net loss of $17.671 million in 2012, it marked the fifth consecutive year of losses for the trucking company.

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Suspicious Minds

Going once, going twice..sold to the highest bidder? Stock market way down USAK way up?