USA Truck is seeking a temporary restraining order to prevent Knight Transportation's continued purchase of USA Truck stock in an attempted hostile takeover of the Van Buren-based trucking company.
USA Truck, in a breach of contract lawsuit filed Thursday in Crawford County Circuit Court, claims Knight is using private confidential information acquired during negotiations for the potential sale of USA Truck, in violation of a confidentiality agreement signed in February 2012.
In mid- to late September 2012, USA Truck rejected Knight's proposal to purchase 100 percent of outstanding shares for $7.25 per share. Knight was provided with confidential information about USA Truck's financial, operational, organizational, vendor and customer information, property and equipment, major contracts/agreements and technology, according to the complaint.
The companies continued to talk, and on Aug. 28, Knight offered to purchase USA Truck's outstanding shares for $9 per share. The increased offer came two weeks after USA Truck filed a 10-Q with the Securities and Exchange Commission, which stated its operating margins improved during the first and second quarters of 2013, according to the complaint.
USA Truck rejected the offer on or about Sept. 6.
"USA Truck rejected the price offer because, again, USA Truck was not for sale and, moreover, the Board believed that Knight's offer did not offer significant compensation to USA Truck's shareholders given the intrinsic value of the company, especially including the many positive developments then occurring at USA Truck. USA Truck noted the significant operational improvements achieved by its new management team in a short time frame, the material year-to-year financial improvements USA Truck has experienced through the end of the second quarter of 2013 and USA Truck's expectation of positive future near term results and performance," according to the complaint.
With three years of losses, the largest a $6.1 million loss in the third quarter of 2012, USA Truck in February named trucking industry veteran John Simone as president and CEO to lead its turnaround strategy. USA Truck attributed the third-quarter 2012 losses to an increase in workers' compensation and health claims, and the write-off of the costs for deferred debt issuance.
USA Truck has experienced six months of decreased losses this year under the new leadership of CEO and President John Simone, but has about $147 million of outstanding net indebtedness. Simone's turnaround strategy has shown a 7.5 percent increase in base revenue the first six months of 2013.
The net loss of $1 million in the second quarter of this year showed another improvement trend over the $2.5 million loss the first quarter, and the $8.4 million loss during the first six months of 2012.
Among the elements in the confidentiality agreement were provisions, that: for two years all confidential information exchanged would remain confidential, negotiations would remain confidential and USA Truck and Knight are prohibited from using any confidential information in connection with "purchase or sales of, or trading in, any securities of the other party," according to the complaint.
On or about Sept. 13, Knight informed USA Truck there was nothing left to negotiate.
On Sept. 26, Knight issued a news release announcing the $9 per share offer extended to USA Truck and Knight's purchase of shares equalling an 8 percent ownership stake in USA Truck. Knight's ownership held 12.2 percent of outstanding shares as of Thursday, according to the complaint. USA Truck rejected the bid.
USA Truck argues Knight's actions are a violation of the confidentiality agreement meant to disrupt USA Truck's turnaround plan in hopes of forcing USA Truck to sell the company for less than its full value.
Further, if USA Truck was put up for sale, Knight's violation of the confidentiality agreement gives it an "undisputed advantage" over any other potential buyer who only has access to publicly available information and because Knight has already purchased a significant block of USA Truck shares. That will deter other bidders from seeking to compete, according to the complaint.
Van Buren, Ark.-based USA Truck on Thursday rejected a $242 million buyout bid from Knight Transportation Inc. of Phoenix.
Knight Transportation Inc. of Phoenix now owns 11.3 percent of USA Truck Inc.'s shares, four days after the Van Buren-based long-haul trucking company rejected an unsolicited $242 million buyout bid...
Knight Transportation in federal court documents denies it violated a confidentiality agreement with USA Truck, and also denies it's attempting a hostile takeover of the Van Buren-based trucking...