Shares of US Xpress Enterprises (NYSE:USX) are soaring on Tuesday, as USX stock is up almost 300%. It’s not often we get an overnight quadruple in a stock piece. So what’s going on here?
The best way to get a big overnight price gain is an acquisition, which is exactly what we have in this scenario.
Knight-Swift Transportation Holdings (NYSE:KNX) has agreed to buy U.S. Xpress for an enterprise value of roughly $808 million (excluding transport costs). The deal is expected to close in late Q2 or early Q3.
Earlier this month, USX stock was sporting a market capitalization of roughly $80 million. Now, that figure stands closer to $310 million.
Shares are trading near $6 a share, with the deal price up just slightly from here at $6.15 a share.
What Does This Mean for KNX, USX Stock?
Obviously, shares of USX stock are exploding higher on the news. However, investors seem to like the deal for Knight-Swift too. Despite the hefty premium for the deal, shares of KNX stock are up about 7% on the day.
That’s likely as the company expects the deal to be accretive to earnings starting in 2024. Further, the company expects its “revenue base to grow by nearly 30%,” while targeting “high-80s adjusted operating ratio and mid-teens return on invested capital for U.S. Xpress by calendar 2026.”
Knight-Swift CEO, Dave Jackson added:
“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.
“We expect to apply the same playbook that proved successful in the Knight-Swift merger as we share best practices, improve operations and work together to help U.S. Xpress become the best that it can be.”
Clearly the market seems to like the deal. While Knight-Swift had to pay a big premium to get the deal done, management believes it will be accretive to the business, particularly with the trends in logistics and shipping.
That’s evident by the rally in KNX stock.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
