United Parcel Services, Inc. (UPS)
has acquired LTL carrier Overnite Transportation Co. (and its subsidiary Motor Cargo) for $43.25 per share, or approximately $1.25 billion in cash which represents a 46% premium.
The acquisition will give UPS its first major foothold in LTL and marks a significant step toward positioning itself as a one-stop transportation business.
“We want to offer our customers the broadest portfolio of transportation and logistics services available from a single source and this is an important capability that we needed to have,” said UPS chairman & CEO Mike Eskew.
“Overnite is a perfect strategic fit for our company.”
“We are pleased that UPS recognizes our commitment to quality service, our broad nationwide coverage and a trained and motivated workforce,” said Leo Suggs, Overnite’s chairman, president & CEO.
“We are confident in our ability to help UPS broaden its diverse service portfolio to its customers.”
UPS’s big move into LTL mirrors FedEx’s earlier acquisitions of Viking Freight and American Freightways Corp. which were re-branded into FedEx Freight in 2002. American Freightways was purchased at a 61% premium for $950 million in cash and stock in 2000.
“We’ve wanted to enter LTL at this time because the industry has become very attractive,” Norman Black, UPS spokesperson told Fleet Owner, adding that UPS has been eyeing LTL for over 10 years. “We’ve been competing about as aggressively as you can with FedEx on the package side and now in LTL we’ll be a competitor.
“LTL has become attractive because of consolidations and watching the survivors grow and flourish as they’ve been improving operating ratios and developing new types of services customers respond to especially in time definite delivery options,” Black continued. “That is what Overnite has been forefront of and that’s a huge trend in commerce now. Certainly we see it in the package world.”
“FedEx is making pretty good money in the LTL business,” analyst Chris Brady, president of Commercial Motor Vehicle Consulting, told Fleet Owner. “With UPS, you’re talking a giant entering the business. They have the resources to fund what they want to do and LTL is going to be more competitive.”
“Overnite is a successful, well run company with excellent growth prospects and has a strong culture and world-class employee base that complement our organization,”Eskew added.
Overnite’s management team is expected to remain in place to run the business.
“This is an exciting time for Overnite and its customers and employees,” added Leo Suggs, Overnite’s chairman, CEO and president. “We are pleased that UPS recognizes our commitment to quality service, our broad nationwide coverage and a trained and motivated workforce. We are confident in our ability to help UPS broaden its diverse service portfolio to its customers.”
With the addition of Overnite, UPS will become a top motor freight carrier with expanded services that will help customers more easily synchronize the movement of goods, information and funds. The single-source solutions offered by UPS now will include a full suite of heavy freight services via air, ground and ocean.
Overnite Corp. is one of America’s leading less-than-truckload carriers with a seventy year heritage. Its principal operating company, Overnite Transportation Company, operates in all 50 states, Canada, Puerto Rico, Guam, the U.S. Virgin Islands and Mexico. Its other operating company, Motor Cargo, is a regional less-than-truckload carrier primarily serving the western United States, Canada and Mexico. Together, they form one of the largest less-than-truckload carriers in the United States with over 200 service centers and 14,200 employees.
UPS is the world’s largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. UPS’s stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at UPS.com.
UPS expects to grow the customer base of the two companies thanks to the deal, Black said. He stressed that Overnite will remain its own operating subsidiary. “Absolutely we believe there will be synergies. Overnite has large to mid-sized customers, which is the focus we’re interested in. Today there are plenty of customers out there that need freight movement in addition to the package side.”
UPS declined to comment on whether it plans to acquire more LTL carriers, but Black said, “Overnite is a large national carrier— there’s no question what we’re getting with this purchase and by that I mean there are no geographic holes with what Overnite offers.”
Overnite serves over 60,000 customers in the U.S. as well as in Canada, Puerto Rico, Guam, the U.S. Virgin Islands and Mexico. UPS said it is too early to comment on whether Overnite will be re-branded.
Satish Jindel, president of transportation consulting firm S.J. Consulting, said that UPS will likely see a good return on the purchase. “The premium is well-deserved when you consider what’s happened in this market,” Jindel told Fleet Owner, pointing to the premiums FedEx paid in building FedEx Freight. “Many people thought they paid too high a premium but you have to look at what it takes to get deals in LTL because the market is consolidating.”
UPS’s Black acknowledged the high price agreed to for Overnite. But even in the face of a U.S. economy that seems to be slowing down, he is optimistic about growing the LTL business as well as UPS’s prospects for becoming a global transportation and logistic provider.
“We think this industry is entering one of its brightest periods,” Black said. “You always worry about the economy slowing but you also have to keep in mind the U.S. economy is very dependent on transportation and specifically on trucking to move all the goods needed to manufacture products and move the goods. The fact that some economists are concerned about how fast the economy is growing doesn’t change the role transportation plays in this economy. Certainly it can be a cyclical business, but it’s much less so now than it used to be— particularly because of the consolidation of industry and the reliance on trucking.”
Additional Information about the Merger
In connection with the merger, Overnite will file with the SEC a proxy statement. In addition, UPS and Overnite will file other relevant documents concerning the merger with the SEC. We urge investors to read the proxy statement and any other relevant documents when they become available because they will contain important information about UPS, Overnite and the merger. Investors will be able to obtain the documents free of charge at the SEC’s Web site, http://www.sec.gov. Documents filed by UPS with the SEC can be obtained by contacting UPS at the following address and telephone number: 55 Glenlake Pkwy. NE, Atlanta, GA 30328, 404-828-6000. Documents filed by Overnite with the SEC can be obtained by contacting Overnite at the following address and telephone number: 1000 Semmes Ave., Richmond, VA 23224, 804-231-8852. We urge you to read the proxy statement and any other relevant documents when they become available carefully before making a decision concerning the merger.
Overnite and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Overnite in connection with the merger. Information about the directors and executive officers of Overnite and their ownership of Overnite common stock is set forth in the proxy statement, dated March 14, 2005, for Overnite’s 2005 annual meeting of shareholders, as filed with the SEC. Additional information regarding the interests of such participants may be obtained by reading the proxy statement when it becomes available.
Norman Black, UPS PR
Teresa Finley, UPS Inv. Rel.
Ira Rosenfeld, Overnite PR
Mike Mahan, Overnite Inv. Rel.