Yellow Defends Plan to Pay High Price for Roadway

Updated from 10:48 a.m. EDT

Yellow(YELL Quote) agreed to acquire Roadway Services (ROAD Quote) for cash and stock worth $48 a share, a 60% premium over a recently beaten-down price.

Officials at Yellow argued on a conference call with analysts that the valuation is reasonable. "It was not too long ago that Roadway was trading at $40 a share. So we think $48 a share is fair value," said William Zollars, the company's chief executive. Shares of Roadway closed Monday at $30.02, but had traded as high as $39.40 as recently as May 6. On Tuesday afternoon, the stock was up $15.43, or 51%, at $45.43.

"The industry is ripe for consolidation," said John Barnes, an analyst at Deutsche Bank. "Right now, there is too much capacity chasing too little freight. Companies are trying to put a dent in capacity." For the past year, truck companies have suffered from weak sales amid a slow economy. ...