Yellow Trucking bankruptcy sparks bidding war
Freight company Yellow, which owns 169 trucking terminals in the United States, is at the centre of a billion dollar bidding war.
Yellow Trucking filed for bankruptcy on Sunday 20 August so that it could wind down its business in an “orderly” way, leaving 30,000 jobs at stake.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” the company’s chief executive, Darren Hawkins, said in a statement.
The failure of the freight business follows a battle with unionised workers over pay, and comes despite Yellow receiving a US$700 million loan from Donald Trump when in office to help the company ride out the Covid pandemic. Yellow says it still plans to fully repay the bailout, though it has nearly 100,000 creditors and US$1.3 billion in debt payments due in 2024.
Some of its creditors include Amazon, with a claim of more than US$2 million, and Home Depot, which is owed nearly US$1.7 million.
However, despite the company’s financial woes it is not short of takers.
Old Dominion Freight Line in North Carolina has submitted a US$1.5 billion bid to buy the trucking company.
The bid trumps an earlier offer by Virginia-based Estes Express Lines and would trigger a potential court-supervised auction.
Any buy-out will be further complicated by the fact that the federal government assumed a 30% equity stake in Yellow in exchange for the bail-out loan.
Yellow has said that the collapse of union talks last month over wages and benefits caused “irreparable harm” to the company by halting its restructuring plans.
In June, Yellow filed a lawsuit against the union, claiming it had caused more than US$137 million in damages by blocking the company’s proposed restructuring plan.
How might the bankruptcy impact drinks companies?
Yellow is categorised as a low-freight trucking company, which means it transports goods at “less than a truckload”, including retail items from vendors such as Amazon.
A 2021 Statista survey which asked US consumers where they had purchased alcoholic beverages in the preceding three months showed Amazon topped the charts, beating supermarket websites and specialist beverage stores to the post.
The bankruptcy could cause disruption for drinks firms that rely on Yellow for delivery, or indeed on Amazon sales and delivery of their products. It may also lead to temporary price hikes as businesses scramble to find new carriers for their goods.
“Those inflationary prices will certainly hurt the shippers and hurt the consumer to a certain extent,” Tom Nightingale, chief executive of AFS Logistics told The New York Times. He suggested that prices would probably normalize within a few months.
Yellow’s acquisitions of other carriers over the past few decades grew it to become the fifth-largest trucking firm in the nation and the third-largest ‘less-than-truckload’ carrier. Its high debt levels prevented it from properly integrating its acquisitions into the company, causing further financial problems.