Rumored CF-Yellow Deal Falls Through

Is another big-time merger among less-than-truckload carriers in the offing?

There was plenty of speculation about that as Consolidated Freightways, Menlo Park, Calif., the nation’s third-largest LTL fleet, confirmed that it had been engaged in discussions with “a third party” — rumored to be Yellow Freight System — concerning a possible business combination.

“These discussions were terminated without any agreement being reached,” the company said.

Talk of a possible merger between CF and Yellow Freight — the nation’s second-largest LTL carrier — ignited trading in Consolidated Freightways stock last week. Nearly 1.5 million shares changed hands Dec. 16, 10 times the normal volume, leading to the company’s announcement later that day. The stock topped out at $17.75 a share Dec. 16, up from $15.75 Friday and $14 the week before.

Yellow Freight spokesman Kent Politsch would not say whether the company was involved in discussions with CF. He said Yellow’s management is “looking at a wide range of opportunities to increase shareholder value.”

Over the past year, Yellow Freight has added time-definite delivery services and focused on expanding its international freight activities.

Yellow Freight’s parent, Overland Park, Kan.-based Yellow Corp., expanded its nonunion LTL business with the recent acquisition of Action Express. Earlier, the company sold Preston Trucking Co., a unionized LTL carrier with operations in the Midwest, Northeast and Mid-Atlantic, to Preston’s management.

The merger of two large unionized LTL carriers has been tried before, but with disastrous results. In 1995, Arkansas Best Corp. attempted to combine the operations of Carolina Freight Carriers Corp. with ABF Freight System. The result was multi-million dollar losses for several years and practically no net gain in freight volume.

“Conventional wisdom is that you can’t put together to major network carriers,” said Paul Schlesinger, a trucking industry analyst for Donaldson, Lufkin & Jenrette, New York. “It’s very difficult. It’s very risky. And it’s very disruptive for employees and customers. I think the odds are against the successful integration, or even common ownership, of national network carriers.”

For the full story, see the Dec. 21 print edition of Transport Topics. Subscribe today.