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Yellow-Roadway Acquisition of USF Pending

Rumors that surfaced in the last full week of February proved true as Yellow-Roadway Corp. and USF Corp. announced on February 28th that Yellow-Roadway’s offer to acquire USF for an estimated $1.47 billion had been accepted by both boards. Shareholder and regulatory approvals will be sought by April 1, according to Bill Zollars, chairman, president and CEO of Yellow-Roadway.

International Brotherhood of Teamsters (IBT) General President Jim Hoffa said the IBT would carefully monitor the deal to ensure job security for its members. The IBT position is similar to its reaction to the formation of Yellow-Roadway in 2003 when Yellow Corp. acquired Roadway. That combination went smoothly and appears to have delivered on promises Zollars made when that deal was announced.

The acquisition of regional LTL carrier USF will mark Yellow-Roadway’s move into the growing overnight and next-day markets. The acquisition announcement comes less than a week after Yellow Transportation trumpeted the successful launch of its own next-day service. Zollars said that effort would continue, as would the USF inter-regional Premier Plus service. Zollars told analysts and media the “healthy competition” would be good.

As with the Yellow-Roadway combination, Zollars focused on synergies to deliver significant financial returns. He said the focus will be on the same kind of back-office synergies that provide Yellow-Roadway with $100 million in its first year and are expected to yield a further $50 million in 2005. The “customer interface” won’t be touched, said Zollars, indicating a clear intention to keep the USF brand and operations intact.

Jim Staley will move from Roadway Express to become president of Yellow-Roadway’s regional operations. He will oversee the integration of USF and New Penn, a Northeast regional carrier owned by Yellow-Roadway. He will also manage USF’s truckload operations.

Zollars noted it was too early to discuss details of a labor strategy for the acquisition. A portion of the USF operations are non-union. Both Yellow and Roadway had divested of their non-union regional operations in the past.

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