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UPS to Buy Overnite Trucking Firm

May 17, 2005|From Associated Press

UPS Inc., the world's biggest shipping carrier, said Monday that it was buying trucking company Overnite Corp. for about $1.25 billion in cash as it continued to expand its heavy freight delivery business.

The deal marks UPS' largest single acquisition and follows the Atlanta-based company's decision last week to spend $24 million to build and equip five regional freight hubs at airports around the country.

The new hubs will allow UPS to ship freight weighing more than 150 pounds using more of its own planes. Similarly, the Overnite purchase will allow UPS to deliver heavy freight in its own trucks rather than contracting out that service as it has done in the past. UPS will still use some third-party providers, Chief Financial Officer Scott Davis said.

In December, UPS bought Menlo Worldwide Forwarding, an air freight business in Redwood City, Calif., that has helped it expand into time-definite guarantees on heavy freight.

Shipping heavy freight has been a small percentage of UPS' overall business, but now the company is seeking to make it a bigger emphasis. Other shippers, like Memphis, Tenn.-based FedEx Corp., carry freight. UPS believes there is growth opportunity in delivering heavy freight on a time-definite basis.

Spokesman Norm Black said heavy freight is where "we want to be able to offer every option to our customers whatever they need."

Under the deal, Overnite stockholders will receive $43.25 for each Overnite share, representing a 46% premium to Overnite's closing price of $29.58 on Friday.

Overnite, based in Richmond, Va., saw its shares rise $12.94, or 44%, to $42.52 in Nasdaq trading, surpassing the previous 52-week high of $38.67. UPS shares rose $1.03, or 1.4%, to $73.18 on the New York Stock Exchange.

Overnite, which serves more than 60,000 customers throughout North America, earned $63.3 million on revenue of $1.65 billion in 2004.

UPS, formerly known as United Parcel Service Inc., said Overnite's management team would remain in place. Davis said Overnite would be run as an independent business, though UPS would look at joint selling options and bundled services.

The deal has been approved by Overnite's board and is expected to close during the third quarter, pending regulatory clearance and shareholder acceptance.

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