Freight and logistics company Forward Air Corp. is having second thoughts about its August offer to acquire the logistics service provider (LSP) Omni Logistics for $150 million in cash plus company stock, the company said today.
Tennessee-based Forward Air had originally painted the maneuver as a way to build leverage in the expedited less-than-truckload (LTL) freight sector, coming just days after fellow LTL carrier Yellow Corp. declared bankruptcy after taking on excessive debt.
However, since that time, a group of activist investors pushed back against the deal by obtaining a temporary restraining order (TRO) freezing certain steps in the merger plan. A court yesterday dissolved that TRO, but Forward Air executives today said they believed that Omni has not complied with certain of obligations in the merger agreement, anyway.
Therefore, Forward Air said it may now back out of the deal. “As a result, Forward is considering its rights and obligations under the Merger Agreement, including potentially exercising its right to terminate the Merger Agreement,” the company said.
However, Dallas-based Omni disputes those assertions, saying today that it has fully complied with all the required provisions of the agreement, and intends to see the deal through to its end.
“Any attempt by Forward Air to suggest otherwise is unfounded and has no basis. Omni believes the Merger Agreement is legally binding and intends to enforce the Merger Agreement and close the transaction as expeditiously as possible,” Omni Logistics said in a release. “Omni remains fully confident that uniting Omni and Forward Air as the premium expedited LTL provider will ensure that the combined company is best positioned to compete and win in an increasingly dynamic industry environment for the benefit of both companies’ shareholders, customers, and employees,” Omni said.
Despite Omni’s effort to rescue the deal, Forward Air enjoys the support of some powerful shareholders, such as Ancora Holdings Group LLC, an Ohio-based investment management firm. Ancora last week had issued a presentation last week raising “serious concerns” with the transaction, and on Thursday praised Forward Air’s decision to evaluate the termination of its merger with Omni.
“We are very pleased with Forward Air’s decision to be transparent with shareholders by disclosing its belief that Omni has not complied with aspects of the previously announced merger agreement,” Frederick DiSanto, chairman and CEO of Ancora, and James Chadwick, president of Ancora Alternatives LLC, said in a joint release. “In light of this, we – and presumably a critical mass of our fellow shareholders – fully support leadership’s decision to explore a termination of the merger agreement. Given that the proposed transaction has faced legal challenges and overwhelming market opposition, the Board of Directors is right to be diligent in holding Omni accountable for any and all non-compliance with the agreement’s terms.”
Editor's note: This article was revised on October 27 to add Ancora’s position on the news.
