Merger of Swift, Knight meant to boost profits while maintaining two separate carriers

Knight Transportation truck Swift Transportation truckThe merger of two of the continent’s largest and most prominent trucking companies, Swift Transportation and Knight Transportation, is meant to boost the financial performance of the two companies while retaining two separate operations, a transportation financial analyst told CCJ last week.

“The message was pretty clear in the announcement, that these businesses will operate independently of one another,” said Brad Delco, managing director and research analyst for firm Stephens, Inc. “As they have stated, they’re going to be separate entities managed separately but hopefully will be able to share best-practices across both businesses to drive fundamental improvements in the business.”

The new company, to be dubbed Knight-Swift Transportation Holdings, will operate about 30,000 tractors and employ about that many drivers. Swift brings the lion’s share of those stats to the deal — about 25,000 tractors and 22,000 drivers, according to 2015 data. In 2016, Swift earned over $4 billion in revenue. Knight brought in $1.18 billion. However, Swift’s net income in 2016 was just shy of $150 million, compared to Knight’s $94 million.

The merger’s key goal, says Delco, is to increase Swift’s efficiency and profitability by bringing Knight’s management style to the truckload giant. Knight has “one of the best management teams in the country,” Delco says, which caught the eye of Swift ownership about a year ago, when merger talks between the two companies began.

“It’s no secret within the industry that Knight is one of the most efficient truck operators in the country,” Delco said. “They have some of the best margins in the business, and as a result they have some of the best returns on invested capital.”

As noted in the companies’ merger deal released last week, Swift CEO Richard Stocking will no longer head the company once the merger takes effect. Likewise, Swift CFO Ginnie Henkley will part from the company.

Outside of those moves, there should be few personnel changes, says Delco.

Both carriers are offering loyalty bonuses to drivers who stay with the companies — an extra penny per mile from May through whenever the deal closes, which Delco says will likely be sometime between July and September.