Overnite buys Motor Cargo
TRAFFIC WORLD 22nd October 2001
OVERNITE BUYS MOTOR CARGO
By JOHN D. SCHULZ
Copyright 2001, Traffic World Magazine Union Pacific Corp.'s Overnite Transportation unit last week made a major expansion of its Western LTL regional reach with the purchase of Salt Lake City-based Motor Cargo Industries for $80 million, based on current stock valuation.
"We are very pleased to have Motor Cargo as part of our family," Overnite Chairman, President and CEO Leo H. Suggs said. "They are a highly successful, customer-focused regional carrier well positioned to continue their record of growth in the West. This acquisition will enable Overnite to accelerate our entrance into the attractive and growing Western regional market." Overnite began using MC as its Western regional partner earlier this year after it allowed a contract with Viking Freight, a unit of FedEx Corp., to expire. Last year MC posted $6.4 million earnings on $131.1 million revenue, compared with earnings of $4.6 million on $125.3 million revenue in 1999. MC operates in 10 Western states. Overnite operates with full-state coverage in 32 states east of the Rockies. "The best way for Overnite to participate in the regional market within the West is with the purchase of Motor Cargo," Overnite spokesman Ira Rosenfeld said. "This gives us focus on the regional market while extending the coverage to markets that neither carrier serves direct." Overnite officials said it would operate the companies separately. That is similar to the successful operating strategies of Con-Way Transportation Services, U.S. Freightways and FedEx units American Freightways and Viking Freight. "It provides the opportunity for growth without the operational risk that has plagued past motor carrier mergers," Rosenfeld said. "We're a regional carrier but no longer out West will we be thought of as a long-haul carrier. Overnite doesn't have to buy terminals or look for new drivers. There is an extensive network in place already." The deal is expected to close by the end of the year. Overnite is entering the third year of an unfair labor practice strike by the Teamsters union, which has won representation at 22 of Overnite's 166 terminals. Motor Cargo has 30 terminals. Two are Teamsters-covered – Salt Lake City and Reno, Nev. Officials emphasized there would be no changes in the labor agreement. There are no plans to consolidate any terminals, Rosenfeld said. "The way the two companies operated yesterday is the way they will operate tomorrow," Rosenfeld said The merger agreement is in two steps. The first calls for exchange of all MC shares in which shareholders may elect to tender for cash, at $12.10 per share, or shares of UP stock, at an exchange ratio of 0.26 shares of UP for each MC share. Hal Tate, CEO and majority shareholder of MC, and an unidentified second shareholder have agreed to tender their combined 63 percent ownership. Tate has committed to taking UP stock, the companies said. MC shareholders who do not tender their shares will get $12.10 in cash in the second-step merger. With its $80 million investment to expand Overnite's reach, UP Corp. appears to be solidifying its grip on its $1 billion-a-year trucking subsidiary. Two years ago, UP Corp. had planned a spin-off of Overnite but those plans have been shelved indefinitely. "With this acquisition, Overnite has positioned itself to remain one of the nation's major trucking companies for years to come," Overnite's Rosenfeld said. "There are no plans to sell Overnite."
