Celadon Buys 6% Stake in Truckload Carrier USA Truck

Truckload carrier Celadon Group last week said it had purchased a 6.29% stake in truckload fleet USA Truck, but did not comment on its plans beyond saying it was “a potentially attractive investment.”

The two companies are both on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada. Celadon ranks No. 42 and is the 10th-largest truckload carrier on the list. USA ranks No. 50 and is the 21st-largest truckload firm.

Celadon Chairman and CEO Stephen Russell said in an interview last week that he had not talked with USA’s management or directors, but that he might do that at American Trucking Associations’ conference this week.

“It will happen, but I don’t know when,” Russell said.

Both Celadon and USA Truck are publicly traded companies, and they confirmed the purchase in Oct. 11 filings with the Securities and Exchange Commission. Celadon is based in Indianapolis and USA is in Van Buren, Ark.

Celadon’s SEC filing said the company paid $4.66 million from Sept. 20 to Oct. 5 for 658,000 USA Truck shares at an average share price of $7.083 each. Celadon had to file with the SEC after it passed the 5% ownership threshold.

Celadon said the price paid “represents approximately 55% of the book value per share of [USA Truck’s] common stock.” Book value measures corporate net worth per share.

Beyond that, the two companies offered no official clues as to what will happen next.

USA Truck CEO Clifton Beckham acknowledged Celadon’s position in a statement.

“The views of our stockholders are very important to us, and we carefully consider their input,” Beckham said. “Our board of directors will evaluate Celadon’s 13D filing in due course. We do not intend to comment further on this matter except as warranted by applicable laws and regulations.”

Speaking at a Dahlman Rose investors’ conference in September, Russell discussed Celadon’s recently doubled credit facility, which, he said, “will be very advantageous if we can make a meaningful acquisition” (9-19, p. 1).

Stock analyst John Larkin told clients of Stifel, Nicolaus & Co. last week that a USA Truck deal “would be a departure from Celadon’s historical acquisition strategy that typically involves the acquisition of small, privately held carriers that Celadon purchases for the value of the carriers’ equipment.”

Larkin also said a deal is far from certain because, “It is unclear to us if Celadon is willing to take on the level of debt required to complete a potential acquisition of USA in its entirety. It is also unclear if USA is a willing seller.”

Such a deal is potentially worthwhile, though, because, “We believe synergies could be large if duplicate overhead is streamlined,” Larkin said, adding, “We don’t expect that to happen overnight.”

Bloomberg News tracks acquisitions made by public companies and listed seven by Celadon over the past 10 years, but none by USA. The Bloomberg data said Celadon’s most recent acquisition — Continental Express for $24 million in December 2008 — was the most expensive.

Bloomberg said USA has a market capitalization, or total stock market value, of $85.9 million. The wire service also said Celadon has no short-term debt and a market cap of $209.5 million.

A year ago, USA’s share price closed at $15.89 on Oct. 13, 2010, but before the end of August, the price dropped below $8 each, closing as low as $6.81 on Sept. 21. Prices rose sharply after the Oct. 11 announcements and closed at $9.94 on Oct. 13.