Yellow-Roadway Corporation: Freight Merger

Topics: YRC Worldwide Pages: 3 (750 words) Published: November 21, 2009
In the wake of recent industry consolidation, Yellow and Roadway Corporation were looking for ways to strengthen their businesses. In 2003, Yellow Corporation, the nation’s second largest trucking company, acquired the industry leader, Roadway Corporation, creating Yellow-Roadway Corporation. The combination strategy was to bring both the companies strengths together to capture significant synergies and growth opportunities. Management decided to keep both company brands operating separately, continuing them to compete against each other. In an effort to expand their geographic scope and operate regionally, Yellow-Roadway bought USF Corp in 2005; and continued to operate each brand separately. Unfortunately over the next couple years Yellow Corporation and Roadway Corporation were forced to merge operations together. In 2009, they changed their name to YRC Worldwide, Inc. to reflect their finalization of the merger. Due to the many different divisions of the company and the purchase of USF, in 2006 Yellow Roadway Corp changed its name to YRC Worldwide, Inc. in March 2009, Yellow Transportation and Roadway finally merged to create YRC.

In 2003, Yellow paid $966 million for Roadway to create Yellow-Roadway Corporation. This acquisition gave them control of more than 15% of the less-than-truckload (LTL) market. The deal valued Roadway at $48 a share, a 60% premium, and required Yellow to assume $140 million in debt. After the announcement of the acquisition, Roadway shares rose 54%, while Yellow shares fell about 5%. The combined company represents only 1% of the $600 billion global freight transportation market.

The fact that 70% of Yellows business was from manufacturing and 70% of Roadways business was from retail supported the decision to remain as separate operations. The chairmen from both companies emphasized that their combination was strictly a merger, not a buy-out, since both companies were effectively operating on their own. The...
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