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Why Swift Transportation Co (SWFT) Shares Surged Higher

Swift Transportation Co (NYSE:SWFT) shares have blasted higher in the pre-market after it and fellow trucking company, Knight Transportation (NYSE:KNX), agreed to merge in an all-stock transaction. According to the deal terms, which have been unanimously approved by each company’s board, each Swift share will convert into 0.72 shares of Knight-Swift while each share of Knight Transportation will be exchanged for one Knight-Swift share. Based on the $30.65 closing price of Knight shares on April 7, 2017, the implied value per share of Swift is $22.07. Upon deal close, Swift shareholders will own around 54% of the new company while Knight shareholders will own the rest. The deal is expected to unlock pre-tax revenue and cost synergies of around $15 million in the second half of 2017, $100 million in 2018 and $150 million in 2019, respectively. In addition, Swift Transportation Co (NYSE:SWFT) updated its guidance to first quarter adjusted EPS of $0.11-$0.12 and second quarter adjusted EPS of $0.18-$0.23. Although those numbers are somewhat below the Street’s expectations, the market is at the moment unconcerned given the potential synergies the merger could unlock.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

The smart money was more bullish on Swift in the fourth quarter, with both the number and the amount held by elite funds increasing quarter-over-quarter. Specifically, of the 742 elite funds we track, 34 were long $576.2 million of Swift Transportation Co (NYSE:SWFT) and accounted for 17.90% of the float on December 31, up from 30 funds and $452.39 million respectively on September 30.

The Bottom Line

Swift Transportation Co (NYSE:SWFT) shares are higher after the company agreed to combine with a fellow trucking peer. For more reading, check out ‘11 Most Profitable Trucking Companies In America‘.


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