Yellow Roadway CEO defends merger

? The head of Yellow Roadway Corp. said his transportation company could improve shareholder value by acquiring trucking company USF Corp., which reported dismal quarterly numbers earlier in the day.

During a conference call with analysts, Bill Zollars, chief executive officer of Yellow, acknowledged that he and others at the Overland Park-based company were disappointed with Chicago-based USF’s reported $5.8 million first-quarter loss. But he said he was “encouraged” by the company’s continued growth in shipping tonnage and margins, which he said were “good indicators of success.”

“Our enthusiasm for the transaction is the same today as it was when we announced the deal,” Zollars said, reiterating that Yellow would pull at least $40 million in cost savings from USF in the first year and $150 million in the long term. “We could more than double the value of USF’s companies through synergies.”

Analysts, however, have grown more skeptical that Yellow can repeat the magic it performed when it merged with Roadway Corp. in December 2003.

“We suspect that turning around the underperforming regional USF into a potentially slowing economy will pose a greater challenge for Yellow than did turning around the underperforming long-haul Roadway into an accelerating economy,” wrote Bear Stearns analyst Ed Wolfe in a research note.

During the call Friday, some analysts said they couldn’t support the merger and suggested, instead, that Yellow’s money would be better spent buying back shares.

Zollars, however, testily explained that the merger was part of the company’s long-term strategy.

“If we didn’t think this would create shareholder value, we wouldn’t do it,” he said.

Yellow announced in February that it planned to acquire USF for $1.37 billion in cash and stock. Zollars has said the combination would strengthen Yellow’s position in the less-than-truckload business, which transports freight from several customers in the same vehicle, as well as give Yellow a presence in the next-day delivery business.

Shareholders for the two companies are scheduled to vote on the deal during special meetings May 23. Zollars said Friday that assuming shareholders approve the deal, the acquisition would be closed the following day.

Yellow shares closed down $1.65, or 3.18 percent, to $50.16 per share in trading Friday on the Nasdaq stock exchange. USF shares were down 86 cents, or 1.92 percent, to $43.87 per share in trading on the Nasdaq.