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Mergers and acquisitions are almost always a big deal, especially when the entities merging represent a significant part of an industry. The merger of Swift Transportation Co. (:SWFTN/A) with Knight Transportation Inc. (NYSE:KNXC) could not involve two more significant companies in the trucking industry.

The deal, announced Monday, combines two of the sector’s biggest operators and represents a combined value of more than $5 billion. As part of the deal, each Swift share will convert to 0.72 share of the new Knight-Swift Transportation Holdings Inc. through a reverse stock split. Knight shares will be exchanged one-for-one and Swift shareholders would own 54% of the new company.


Truckload Services

The truckload (TL) services market where both Knight and Swift are active involves full truckload hauling – typically 500 miles or more – by retailers and manufacturers. In that sector, Knight ranks 22nd and Swift comes in at fifth. The other main type of trucking is called less than truckload (LTL) and involves filling a truck with smaller shipments from several customers.

Top competitors to Swift and Knight include United Parcel Service Inc. (NYSE:UPSC) and FedEx Corp (NYSE:FDXA) which offer both TL and LTL service. This deal would be the largest since XPO Logistics Inc. (NYSE:XPOA) bought out Con-way Inc. for $3 billion in 2015. Shares of both Knight and Swift have suffered since last year due to weak pricing, excess capacity and lower demand. Another factor has been changing shipping patterns as more and more consumers turn to e-commerce sites like Amazon.com Inc. (NASDAQ:AMZNC) for the merchandise needs.

On The Cusp Of Growth

Industry observers see 2017 as a time of potential growth for the trucking industry. “The economic outlook has solidified for 2017, and freight growth is expected to accelerate versus what we saw in 2015 and 2016,” said Jonathan Starks, chief operating officer at FTR Transportation Intelligence.

Starks said he expects pricing for large contract that make up the bulk of Knight and Swift’s business will begin to grow near the end of this year. Cost savings as a result of the merger could allow for the generation of greater profits than either carrier would have had alone.


Hiring As An Indicator

Meanwhile trucking firms nationwide added half as many jobs in March as they did in February. February represented a 5-year high for hiring in the trucking sector. This came at a time when carriers were optimistic that shipping demand was going up. The market, however, has been uneven since then.

Now, as noted above, most experts are expecting full recover by the second half of this year. What is up is warehouse part-time positions. Amazon said it planned to add 25,000 positions in the U.S. this year. Warehouse and storage jobs were up more than 5% year over year versus trucking which rose just under 1.7% from a year ago.

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