YRC Worldwide Inc. (YRCW:US), the trucker that stumbled after reaching No. 1 in the U.S. through mergers, said it remains interested in acquiring Arkansas Best Corp. (ABFS:US) following the rival company’s rejection of an offer to begin talks.
Arkansas Best rose 9 percent to its highest closing price since April 2012 after YRC confirmed the approach. Arkansas Best rejected a YRC offer made in late March to explore an acquisition of its largest unit, ABF Freight System Inc., the company said in a U.S. regulatory filing posted today.
YRC avoided bankruptcy with credit accords in 2009 and 2011, after more than $2 billion in acquisitions left it saddled with debt and a slowing economy hurt sales. A deal by the Overland Park, Kansas-based trucker, which has reported (YRCW:US) six straight annual losses, may be tough given its financial situation, said Art Hatfield, a Raymond James & Associates Inc. analyst.
“I don’t think it’s serious at all,” he said in an interview. “YRC’s balance sheet couldn’t handle more debt, so I don’t know what they’re thinking in that regard. It just doesn’t make any sense,” said Hatfield, who is based in Memphis, Tennessee.
The trucker had long-term debt of $1.3 billion at the end of the first quarter, when it recorded a $24.5 million net loss.
YRC is “much stronger” financially as a result of work over the past year and believes an acquisition of Arkansas Best would boost efficiency, Chief Executive Officer James Welch said in an interview today. Duplicate facilities could be sold to help fund the transaction, he said.
“We both have excess capacity and we see a lot of synergies by combining those networks and becoming more efficient,” Welch said. He declined to discuss specifics of the acquisition offer.
Arkansas Best climbed to $16.73 at 4 p.m. New York time, while YRC added 1 percent to $14.07.
Arkansas Best hasn’t had any contact with YRC since declining the overture in early April, Kathy Fieweger, vice president for marketing and communications at the Fort Smith, Arkansas-based company, said today. She declined to discuss specifics of the offer.
The trucker is focused on “ongoing labor negotiations as well as other strategic and operational initiatives” that make it inappropriate to consider a YRC offer at this time, the company said in the filing.
Hatfield rates (YRCW:US) YRC underperform and Arkansas Best market perform.
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