Trucking giants Yellow Corp., Roadway to merge
Yellow Corp., parent company of national less-than-truckload carrier Yellow Transportation and other logistics operations, said it will acquire Roadway Corp. and its leading LTL unit Roadway Express, creating one of the biggest U.S. freight transportation companies.
The news means the big four LTL carriers that dominated the industry last summer have been cut in half, following the September demise of Consolidated Freightways.
Yellow said it will pay $966 million in stock and cash for Roadway, and assume about $140 million in Roadway debt for a total acquisition cost of about $1.1 billion. Combined revenue for both companies was nearly $6 billion in the 12 months ending in the first quarter.
The new company will be known as Yellow-Roadway Corp. William Zollars, president and chairman of Yellow, will lead the combined company. Roadway President James Staley will continue to lead Roadway, which will be an operating entity within the new holding company. Roadway also owns regional LTL New Penn Motor Express.
Yellow said the deal will help it market its global logistics services to Roadway customers. Roadway has a strong presence in the Mexico and Canadian markets. The merger is estimated to save the companies about $45 million per year in operating costs within two years and $125 million within five years.
The combination of the two companies “accelerates our ongoing strategy to transform Yellow into a global transportation services and solutions leader,” Zollars said in a statement. Customers will still deal with the same Roadway organization, he said, but benefit from expanded service and technology capabilities.
Yellow has built substantial cash reserves in recent years and made no secret of its willingness to acquire logistics and trucking companies that could grow its bottom line.
Edward Wolfe, transportation equity analyst at Bear Stearns & Co., estimated the combined company would control about 58 percent of the total long-haul LTL market and 17 percent of the LTL market as a whole.
In June, Roadway adjusted its second quarter earnings outlook by 50 percent as softer than anticipated tonnage levels, pricing pressures and a shift in the freight mix away from high-yield, time-critical services forced the company to predict revenue shortfalls.
On the same day as the merger announcement, Roadway reported second quarter revenue was up 13 percent to $741.5 million and net income was $6.3 million, or 33 cents per diluted share, compared to net income of 5.7 million, 30 cents per share, during the same period in 2002.