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Knight-Swift Transportation Holdings on July 6 announced it had acquired less-than-truckload specialist AAA Cooper Transportation.
The acquisition was valued by the companies at $1.35 billion. AAA Cooper is expected to generate approximately $780 million in revenue and $80 million in operating income for full-year 2021. Knight-Swift sees the deal as a growth opportunity and way to enter into the LTL market.
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“We have long had interest in the LTL space and admired the success of AAA Cooper,” Knight-Swift CEO Dave Jackson said in a statement. “We feel honored to be stewards of the AAA Cooper brand.”
Knight-Swift said it had three main requirements for acquiring its first LTL operation: The company needed to have significant market share, be profitable and have management depth to operate independently and maintain a good company culture.
“We were excited to have identified AAA Cooper as a partner that meets all three requirements,” Jackson said. “I couldn’t be happier to finally find the right time for both of us to create a partnership. This transaction firmly positions us as a meaningful player in the LTL space, where we intend to grow both organically and through future acquisitions.”
AAA Cooper has a network of about 70 facilities throughout the Southeast and Midwest. Its fleet includes nearly 3,000 tractors and 7,000 trailers. The Dothan, Ala.-based carrier will continue to operate independently, with CEO Reid Dove retaining his leadership role. Dove also has been appointed to the Knight-Swift board of directors.
We are excited to announce the KNX acquisition of AAA Cooper Transportation. AAA Cooper is a leading less-than-truckload (“LTL”) carrier that also offers dedicated contract carriage and ancillary services. Welcome to the KNX Team!
— Swift Transportation (@SwiftTransport) July 6, 2021
“Joining the Knight-Swift team is an exciting combination for the AAA Cooper team members and customers,” Dove said. “It will allow us to pursue new opportunities and accelerate our growth.”
The purchase price consisted of $1.3 billion in cash, $10 million in Knight-Swift shares and about $40 million in assumed debt. Cash for the transaction was funded from a $1.2 billion term loan provided by Bank of America, as well as existing liquidity.
“This is the fusion of two excellent companies in their respective sectors of the transportation industry, which makes this a win for our people, our customers and for the newly expanded Knight-Swift team,” Dove said.
Knight-Swift received generally positive reactions from analysts after announcing the acquisition. Deutsche Bank research analyst Amit Mehrotra called the decision to enter into the LTL market big. He had predicted at the beginning of the year that the carrier would make a transformative acquisition.
“From a synergy perspective, we think it’s significant,” Mehrotra said. “For example, LTL companies typically have many more customers than TL companies, potentially allowing KNX’s TL operations to benefit from a broader customer base.