Forward Air Corporation officially wants out of its planned takeover deal with Omni Logistics.
The transportation and logistics services provider filed a countersuit against Omni Logistics Friday under the belief that the conditions to close their proposed $3.2 billion merger have not and will not be satisfied.
In October, Forward Air first said it was considering terminating the merger, accusing Omni of failing to comply with some obligations. This prompted Omni to sue Forward in the Delaware Court of Chancery at the end of the month to enforce the deal’s completion.
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In its countersuit, Forward wants a court order stating that it isn’t obligated to close the transaction and can terminate the deal.
Forward Air declined to provide additional commentary on the lawsuit.
Omni fired back on Monday, denying Forward’s counterclaim and saying it has worked “diligently and cooperatively” with Forward during the merger process to close the deal. According to Omni, any attempt by Forward Air to suggest otherwise is “baseless.”
Omni said it intends to enforce the deal, assuming it’s legally binding, and close the transaction “as expeditiously as possible.”
“Forward Air has yet to provide any refutation of the strategic rationale of the planned combination,” Omni Logistics said in the statement. “Every day Forward Air delays in fulfilling its legally binding obligations under the merger agreement, it incurs significant costs that are ultimately borne by its shareholders.”
The anticipated merger has been under fire from the day it was announced on Aug. 10, with Forward’s stock falling nearly 37 percent since.
A deal would combine Forward—with a national less-than-truckload (LTL) network of 12 regional hubs, more than 200 terminals in North America, a fleet of 6,700 trailers as well as dedicated services across full truckload, intermodal, final mile and its customs brokerage—with Omni’s 40 terminals, and multimodal asset-light freight forwarding and customs brokerage services.
In a presentation on Aug. 10, Forward highlighted the deal’s cross-sell potential, stating that its expedited LTL network would be introduced to Omni’s 7,000 existing and new customers. And the company sold Forward’s own customers on gaining access to Omni’s high-touch services covering air, ocean and ground.
But critics have slammed the deal. One minority shareholder urged Forward to renege because the merger would be “too big and too complicated” with interest rates as high as they are right now. Another investor, Ancora Holdings, wanted Forward to replace CEO Tom Schmitt and the board of directors, saying the costly deal was “intentionally structured to avoid a pre-closing shareholder vote.”
Other concerns stem from some of Forward’s freight forwarder customers who say the company would essentially be acquiring a competitor. Forward is also pushing more direct relationships with shippers, further spooking the forwarding community.
In an October earnings call, Forward aimed to quell those concerns, noting that its average daily volumes with domestic freight forwarders increased by more than 14 percent. But that increase likely came from the fallout from the Yellow bankruptcy.
Well before the pending deal was in play, Forward had grown its LTL direct shipper customer count by more than 33 percent year over year from the third quarter of 2022, to over 240 direct shipper customers.
Omni said its LTL pipeline is up 480 percent since the deal was announced.
In its response to Forward’s countersuit, Omni Logistics said a finalized deal would still benefit shareholders, citing the need for third-party logistics (3PL) providers to have direct relationships with shippers.
Omni also said its services can help Forward Air access “everything it seeks to execute its business strategy,” and that its interests are aligned with Forward’s shareholders.
At the time of the deal, the $3.2 billion merger included just $150 million in cash, requiring Forward to fund the rest with debt and equity. The terms call for Omni’s stakeholders to receive a 37.7 percent equity stake in the new company, while Forward would take on $1.4 billion in net debt.
Forward intends to file a public version of its answer and counterclaim by Friday.
Omni asked the court for a trial date on the matter before the agreement expires on Feb. 10.
