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Truckers' Shares Surge as Rival Files for Bankruptcy Protection

Transit: Roadway, Yellow and Arkansas Best did a better job during the recession and stand to gain most of Consolidated Freightways' business.

September 04, 2002|From Bloomberg News

Roadway Corp., Yellow Corp. and Arkansas Best Corp. shares rose as the truckers began divvying up $1.5 billion or more in annual sales from collapsed rival Consolidated Freightways Corp.

Home Depot Inc., the largest home-improvement retailer, said it started shifting freight to Roadway in August as Consolidated began to founder. The trucker, with sales of $2.24 billion last year, filed for Chapter 11 bankruptcy protection Tuesday, one day after announcing it was ceasing operations and letting its 15,500 workers go.

Roadway, Yellow and Arkansas Best did a better job managing through last year's recession and stand to get most of the failed rival's customers, analysts said. Consolidated was the third-biggest U.S. trucker, with 15% of the market for companies that combine many customers' shipments in each trailer.

"This is a $2-billion revenue opportunity that hasn't been seen in some time," said James Corridore, a Standard & Poor's analyst. Roadway, Yellow and Arkansas Best "are all going to see a nice pickup in their business."

Akron, Ohio-based Roadway expects to get "more than its equivalent share" of Consolidated's national sales, Chief Financial Officer Dawson Cunningham said. That may be enough to raise Roadway's third-quarter tonnage to year-2000 levels, he said.

Roadway shares rose $3.63, or 15%, to $27.23, while Overland Park, Kan.-based Yellow gained $2.76, or 12%, to $25.05. Arkansas Best rose $5.18, or 25%, to $25.76. All trade on Nasdaq.

Trading in Consolidated shares was halted, and the Vancouver, Wash.-based company said the shares probably will have no value because it won't be able to pay all creditors.

Roadway, Yellow and Arkansas Best have more efficient terminal networks and pickup and delivery systems than Consolidated and stand to benefit most, Salomon Smith Barney analyst Scott Flower said.

USFreightways Corp. and CNF Inc.'s Con-Way unit also will be helped because those regional truckers have expanded their network to carry cargo, he said.

Yellow expects "to pick up our fair share" of business, Chief Executive William Zollars said, declining to give a target. He said he expected rates would rise an unspecified amount over the next few weeks because the truck industry's capacity has been reduced.

"Some customers are so big that they only like to do business with a big company like Roadway or Yellow, which have the ability to pick up some nice-sized accounts," Corridore said. The newly reduced industry capacity "can only help the pricing power" of rivals.

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