UPS has entered the less-thantruckload (LTL) business with a bang. The company announced last month that it had reached an agreement to acquire Overnite Corp. for $1.25 billion, the largest acquisition in UPS's history. To secure that new heavy freight shipping business, UPS paid a 46-percent premium for Overnite, which saw its stock rocket to over $42 a share on the news.
In a conference call with reporters, UPS CFO Scott Davis defended the purchase price and noted that the company's decision to buy Overnite rather than one of its competitors followed a lengthy selection process. "UPS is a patient investor and we pay what we think is a fair price," Davis told the Associated Press.
Based in Richmond, Va., Overnite reported net income of $63.3 million in 2004 on revenue of $1.65 billion. The carrier serves more than 60,000 customers in the LTL and TL segments.
"Overnite is a perfect strategic fit for our company," said Mike Eskew, UPS chairman and CEO. "We want to offer our customers the broadest portfolio of transportation and logistics services available from a single source and this is an important capability that we needed to have."
The deal is the second within five months for UPS, which last December bought airfreight provider Menlo Worldwide Forwarding in order to expand into the time-definite heavy freight business.