Activist investor Ancora Holdings Group is calling on shareholders of Forward Air Corporation to sack chairman George Mayes and two other board members, citing a distrust in their ability to “support a credible strategic review.”
The Forward Air board first initiated a strategic review of its business in January, after multiple activist investors including Ancora had called for the company to consider other options, including selling the company.
In a letter to Forward shareholders, Ancora said it would vote against Mayes and directors Javier Polit and Laurie Tucker for reelection at the upcoming annual shareholders meeting on June 11. Directors would be required to resign if they don’t secure 50.1 percent of the votes.
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Shares rose 4 percent in morning trading Wednesday after the release of the letter.
Sourcing Journal reached out to Forward Air Corp.
Ancora maintains that the three “unfit legacy directors” cannot be trusted to make decisions that benefit shareholders, citing their support for the “disastrous,” litigation-filled acquisition of Omni Logistics and the resistance to public calls for a strategic review last year. Ancora, which a 4.1 percent stake in the company, is one of four minority shareholders that have sought a shakeup at Forward Air over the past year.
“In the four months since its [strategic review] announcement, the board has moved alarmingly slowly, causing us to become deeply troubled by its apparent inability or unwillingness to advance shareholders’ best interests,” the Ancora representatives said. “We fear that the board has not even entered into non-disclosure agreements with any interested parties as of the date of this letter.”
Frederick DiSanto, chairman and CEO of Ancora Holdings Group, and James Chadwick, president of Ancora Alternatives, penned the letter.
The hedge fund says it wants to send the board a message that “the status quo is unacceptable in light of the significant value that has been destroyed” by the company.
The $2.1 billion Omni Logistics deal generated scrutiny from shareholders and Forward Air customers alike from the time it was first announced in August 2023, ultimately leading to the departure of the CEOs at both companies.
Forward Air’s stock price has reflected the sentiment, cratering more than 80 percent since the initial announcement.
“The Omni transaction was egregious for Forward Air shareholders from the beginning, as evidenced by the fact that it was intentionally structured to avoid a pre-closing shareholder vote, was funded by a whopping $1.85 billion in debt and effectively coerced shareholders to vote for their own dilution,” said Ancora. “The deal incurred substantial earnings quality risk and introduced significant potential competitive disadvantages for the company’s core domestic freight forwarding customers.”
In the letter, Ancora also claimed that the board was “slow-walking the company’s sale process,” calling out the directors’ “alarming” lack of urgency in pursuing a sale. The wealth management firm pointed to the fact that it took the board three months after hiring Goldman Sachs to announce a formal sale process.
Additionally, Ancora called the logistics service’s provider’s balance sheet an “acute concern.” As of the company’s fourth quarter, total long-term debt was $1.68 billion.
“The longer inaction persists, the more likely it becomes that Forward Air encounters further distress and negative financial and operational outcomes,” said Ancora. “We continue to believe that the private market is the best place for Forward Air to fix its balance sheet issues, improve operations and profitability, and serve customers and other stakeholders.”
The hedge fund said there was no reason Forward Air should not expedite its sale process, especially since multiple private equity firms are shareholders.
To avoid interfering with a possible sale process, Ancora says it chose not to nominate new director candidates for election to the Board this year.
Ancora’s concerns have been lobbied by other hedge funds. Between Ancora, Alta Fox, Clearlake Capital Group and Irenic Capital Management, roughly 25 percent of Forward Air’s outstanding shares have publicly voiced support for exploring strategic alternatives.
Ancora has had its hand in a few recent board battles within the apparel supply chain. Last year, three director nominees were voted in at Norfolk Southern after a months-long proxy fight. The hedge fund also sought to replace Pitney Bowes CEO Marc Lautenbach two years ago, and while their own candidate wasn’t selected, Lautenbach stepped down.
And in late 2022, Ancora sought to replace then-Kohl’s CEO Michelle Gass, who ultimately left the company for Levi’s two months after the push.
Forward Air will first-quarter post earnings aftermarket on Wednesday.
