Knight, Swift Merge to Form $5.1 Billion Truckload Carrier
Swift ranks No. 6 and Knight ranks No. 29 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
The all-stock transaction combines under common ownership two long-standing industry leaders, creating a truckload transportation company with $5 billion in annual revenue with a strong presence in dry van, refrigerated, dedicated, cross-border Mexico and Canada, and a significant presence in brokerage and intermodal. The holding company structure will enable the Knight and Swift businesses to operate under common ownership and share best practices while maintaining distinct brands and operations. The company will remain headquartered in Phoenix, operating with about 23,000 tractors, 77,000 trailers and 28,000 employees.
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The combined company, Knight-Swift Transportation Holdings Inc., will trade on the New York Stock Exchange under the ticker “KNX.”
Knight’s executive team will lead the new company, with Knight Executive Chairman Kevin Knight, Vice Chairman Gary Knight, CEO Dave Jackson and Chief Financial Officer Adam Miller filling the same roles with the new company. Kevin Knight will also serve as president of the Swift operating companies after the merger is completed.
Swift founder and controlling shareholder Jerry Moyes will serve as a nonemployee senior advisor to Kevin and Gary Knight. Swift CEO Richard Stocking and CFO Ginnie Henkels will remain in their roles during the transition, and exit once the deal has closed.
Post-merger, the companies will maintain distinct operations under their existing brands.
During an April 10 conference call the companies hosted to discuss the deal, Moyes said he was “very confident that this is the right approach” for the company’s future, and asked Swift employees to join him in supporting the Knight leadership team. Kevin Knight, who started his trucking career with Swift, said during the call that he “can’t wait to be involved with Swift again,” to both learn about what has happened there since he left 26 years ago to found his company, and also to share “all of the things [Knight] has created” during those years.
Kevin Knight stressed during the call the combined company is committed to ensuring that their customers do not suffer from the uncertainties that sometimes come in the wake of mergers. “We will not subject our customers to disruption,” he said. “They will be served by their existing contacts in each company. We are taking those risks off the table.”
He also believes that the new company will be able to realize efficiencies of scale that were previously unavailable to each. “[We] have significant opportunities for purchasing economies of scale,” he said, pointing specifically to insurance and technology, that “now will be levered across the entire spectrum.”
He also believes Knight has something to learn from Swift when it comes to one segment of the trucking industry: dedicated. “Swift is one of the premier providers of dedicated in this industry. I believe [Knight] has a lot to learn on the dedicated side of the business,” he said.
Under the terms of the definitive agreement, each Swift share will convert into 0.72 shares of Knight-Swift by means of a reverse stock split. Each share of Knight will be exchanged for one Knight-Swift share. Based on the $30.65 closing price of Knight shares on April 7, 2017, the last trading day prior to the announcement, the implied value per share of Swift is $22.07. Upon closing of the transaction, Swift stockholders will own approximately 54% and Knight stockholders will own approximately 46% of the combined company.
The combined company would have an implied enterprise value of $6 billion based on: Knight’s closing share price on April 7, 2017; the number of combined company shares expected to be outstanding after closing, and the combined net debt of Swift and Knight as of Dec. 31, 2016.
In a statement, Kevin Knight said: “In Knight’s 26-year history, we have built a truckload company with industry-leading margins and investment returns. 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.”
Swift Chairman Richard Dozer said: “This is a terrific opportunity for our stockholders, who stand to benefit from the significant upside potential of this transaction. Indeed, by coming together under common ownership, the companies will be able to capitalize on economies of scale to achieve substantial synergies. This is an exciting chapter in the Swift story and everyone who is a part of it should be both proud of what we bring to the table and excited about what lies ahead. I am confident in this new team, in the new structure and in the future of Swift in the industry.” Dozier will remain a member of the new company’s board of directors.
