Knight-Swift acquires DHE as next piece of national LTL map

Knight-Swift Transportation announced Tuesday that it has acquired less-than-truckload carrier Dependable Highway Express (DHE) for an undisclosed sum.

A wholly owned division of Los Angeles-based Dependable Supply Chain Services, DHE is a regional LTL operation with 14 service centers providing direct overnight service in California, Nevada and Arizona, according to its website. It provides LTL coverage in 40 states through partner agreements.

DHE generated $122 million in revenue for the past 12 months with a 90% operating ratio (10% operating margin). SJ Consulting listed DHE as a top-25 LTL carrier by revenue last year. Knight-Swift said the deal will be immediately accretive to earnings.

This is Knight-Swift’s (NYSE: KNX) third LTL acquisition. In 2021, the truckload-centric transportation provider surprised the industry when it acquired two LTL carriers. In July of that year, it purchased AAA Cooper Transportation, which was operating approximately 70 terminals in the Southeast and Midwest at the time, for $1.35 billion. It then bought Midwest Motor Express and its 33 facilities in the Upper Midwest and Northwest for $150 million at the end of 2021.

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Knight-Swift’s management team tipped its hand during its second-quarter earnings call last week, saying it would be “disappointed” if it couldn’t complete an LTL acquisition within the next 12 months.

Since the company entered the LTL market three years ago, it has acquired or assumed leases on 56 terminals, which includes the addition of 25 properties (12 of which are leased) from bankrupt Yellow Corp. (OTC: YELLQ). Prior to the DHE acquisition, Knight-Swift had planned to open a total of 38 terminals in 2024 (a 22% increase to door count).

The DHE deal pushes Knight-Swift’s LTL annual revenue to more than $1 billion. Knight-Swift generated $976 million in LTL revenue for the 12-month period ended June 30. It also increases Knight-Swift’s terminal and door count by 10%, giving it coverage of approximately 70% of the U.S. population and “seamless coast-to-coast service.”

Knight-Swift plans to build a national network, which leaves the Northeast as the only major hole in its coverage map.

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“The strategic value of acquiring a strong Southwest competitor like DHE is meaningful given the impact to our coverage area significantly expands the customers we can serve as well as the difficulty of building or acquiring LTL facilities in many of these locations,” said Knight-Swift CEO Adam Miller in a news release.

DHE’s employees will remain on board, and the company will continue to operate in its name as a separate brand under AAA Cooper. Joe Finney, DHE’s current chief operating officer, will become DHE’s president.

“Coupling the proud DHE brand with our resources, network, and scale should represent expanded opportunities for employees and enhanced offerings for customers,” Miller said.

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Dependable will continue to operate its other businesses, which include truckload, warehousing, drayage and third-party logistics.

“While we never intended to sell the division, we have watched with admiration as Knight-Swift set about building a leading national LTL business,” said Dependable CEO Ronald Massman. “When the Company approached us about a transaction, we immediately saw the strategic merit of the Dependable LTL division joining the platform.”

Scudder Law was the legal adviser to Knight-Swift. Houlihan Lokey was the financial adviser for Dependable.

Shares of KNX were up 2.7% at 11:13 a.m. EDT on Tuesday compared to the S&P 500, which was down 0.5%.

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