Why U.S. Xpress Enterprises Stock Is Up Big This Week

What happened

U.S. Xpress Enterprises (USX) was the target of a big-premium buyout this week, and its stock is in the fast lane as a result. Shares of the trucking company are up more than 280% for the week, according to data provided by S&P Global Market Intelligence, after the company agreed to be acquired by Knight-Swift Transportation Holdings (KNX -2.17%).

So what

U.S. Xpress is a Tennessee-based trucking company that operates from a network of 14 facilities located primarily in the Eastern half of the U.S. The company generated about $2.2 billion in total operating revenue in 2022, operating a fleet of about 7,200 tractors and 14,400 trailers.

On March 21, Knight-Swift agreed to acquire the company for about $808 million, including debt. Terms of the deal call for Knight-Swift to pay $6.15 per share in cash for each share of U.S. Xpress, a premium of more than 300% to the target's pre-announcement closing price.

"The opportunity to add one of the largest and most well-known brands in our industry, with significant opportunity to improve earnings, gain customers and reach more professional drivers, was very compelling to us," Knight-Swift CEO Dave Jackson said in a statement.

The deal is subject to regulatory approval and a shareholder vote. The Fuller family, which owns 29% of U.S. Xpress and controls about 58% of voting power, has agreed to vote in favor of the transaction.

Now what

Knight-Swift has been a consolidator in the transportation sector, and this latest deal would accelerate its push. U.S. Xpress has not been a top performer in recent years, and Knight-Swift believes it can improve efficiency and drive margins higher once it gets the operation under its wing.

Mergers like this are not without risk, and Knight-Swift is taking on additional debt to finance the deal. But if it all goes to plan, Knight-Swift would solidify its place as one of North America's dominant trucking companies.

For U.S. Xpress shareholders, the lofty premium offered is likely a better opportunity than waiting out an in-house turnaround.