(The following article by Chip Jones was posted on the Richmond Times-Dispatch website on October 31.)
RICHMOND, Va. — The share price of Overnite Transportation Co. went up yesterday even before it returned to the stock market.
In a filing with the Securities and Exchange Commission yesterday, Richmond-based Overnite raised the price of its initial public offering to $17 to $19 a share, from $15 to $17 a share.
Overnite said in its amended prospectus that it would still sell 25 million shares of common stock.
Overnite is being spun off from Union Pacific Corp., the Omaha, Neb., railroad that bought the Virginia trucking giant for $1.2 billion in 1986. Before that, it traded on the New York Stock Exchange.
According to the latest prospectus, Union Pacific should reap about two-thirds of its original investment – $807.2 million – from the spinoff. This includes the proceeds of cash from the stock, a one-time dividend and debt forgiveness by Overnite.
Overnite has been awaiting SEC approval for the initial public offering. It has applied to list on the Nasdaq stock market under the ticker symbol OVNT.
“I think it’s a good decision for them to divest Overnite,” said Mark Levin, a transportation analyst at Davenport & Co. in Richmond, which is not involved in the transaction.
Many analysts had expected Union Pacific to recoup approximately half of its original investment. Yesterday’s news of a higher IPO price appears to have added as much as $200 million to the railroad’s net return.
Union Pacific first tried to spin off Overnite in 1998, but market conditions forced it to withdraw that stock offering a year later.
The company wants to focus on its core railroad business and plans to use the proceeds of the Overnite sale to help pay down debt, according to Levin.
Overnite is the Richmond area’s 32nd-largest private employer, with 930 full-time employees, according to figures released early this year.
It has a freight terminal on Midlothian Turnpike, but the bulk of local Overnite employees work at the company’s headquarters at 1000 Semmes Ave. in OVERNITE South Richmond.
It has 171 service centers across the United States, Canada, Mexico, Puerto Rico and the U.S. Virgin Islands.
Overnite has 12,600 employees, including 9,000 drivers and dock workers in a predominantly nonunion work force.
Its CEO and chairman is Leo H. Suggs, 63, who has been at the company’s helm since 1996.
Overnite operates in the most profitable segment of the trucking industry – less-than-truckload – which delivers freight for a number of customers from the same truck trailer.
The sale is expected to free Overnite for more expansion, which it has pursued steadily despite a drawn-out unfair labor practices strike by the Teamsters that ended last year.
John Schulz, trucking correspondent for the trade magazine Traffic World, said, “There are just advantages to being their own captain as opposed to a unit” of a larger company.
But he noted that Union Pacific helped Overnite weather the Teamsters strike. The provision that forgives $183 million that Union Pacific owes the trucking company “most likely is repayment for UP support” during the strike, Schulz said.
Overnite spent millions of dollars on security and incurred other costs to weather the Teamsters’ protests and legal challenges.
Overnite has a net worth of about $635 million and ranks as the nation’s sixth largest less-than-truckload carrier. Overall, it has the nation’s 18th-largest truck fleet, with 19,481 trailers, 5,299 tractors and 114 straight trucks.