Forward Air and Omni Logistics will be merging after all.
Both companies have agreed to settle their litigation against one another, targeting an official closure of their merger by Friday.
The deal will come at a cheaper price for the less-than-truckload (LTL), logistics, transportation and warehousing services provider. While Forward’s first proposed deal for Omni was valued at $3.2 billion, including nearly $1.4 billion in debt, the new merger now values the firm at $2.1 billion. The new deal gives Omni an equity value of roughly $743 million, based on the Jan. 19 closing price of $51.30 a share.
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The amended agreement will give Omni shareholders $20 million in cash, instead of the $150 million initially agreed, as well as 35 percent of Forward’s common equity, in lieu of the 37.7 percent of equity previously agreed on.
Forward Air’s stock jumped 16 percent in Monday morning trading when the announcement was made, although it gave back most of the gains by noon.
Dr. Tom Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute, said he wasn’t surprised that the deal was proceeding under new terms.
“Despite some hard feelings, I think that both organizations saw this writing on the wall and it was a matter of arriving at revised cash and equity numbers for the deal to get resettled,” Goldbsy told Sourcing Journal. “Granted, there will be lingering hard feelings by some in the investment community, but it makes sense to me for the acquisition to proceed.”
The drama from the deal started shortly after its preliminary announcement in August, when both investors and customers alike criticized the agreement. One minority shareholder called the deal “too big and too complicated,” while others argued that the Omni acquisition would turn many of its freight forwarder customers into competitors.
After the pushback, Forward Air said in October that it considered exiting the original proposed takeover of Omni. In response, Omni then sued logistics firm in a bid to enforce the deal’s closure.
In mid-November, Forward came back with a lawsuit of its own, with the company seeking a court order stating that it wasn’t obligated to close the transaction and can terminate the deal. Forward had accused Omni of failing to comply with certain obligations of the deal, and misrepresenting financial projections as a way to exit the merger.
Throughout, Omni maintained that it acted in good faith and completed all pre-deal requirements.
The commotion didn’t end with the twin lawsuits—another minority shareholder, Ancora Holdings, accused Omni Logistics of launching a subpoena-filled “intimidation campaign” against the hedge fund for its opposition to the deal.
Goldsby speculated in November that it appeared Forward Air was “succumbing to the pressures” that Ancora brought to the table, ultimately leading to the November countersuit.
And in September, three ex-employees, including former chief financial officer Rodney Bell, sued Forward Air in a Tennessee court to block the purchase on the grounds that they were shareholders and didn’t get the right to vote on the deal. The court temporarily blocked the deal, before reversing course a month later.
Goldsby mirrored the struggles within the deal-making process with the overall conditions shippers are currently enduring as they aim to strengthen their own supply chain capabilities via new technologies.
“This squabble fits the larger tapestry of tumult in transportation that has decision makers taking frequent, harder looks at their options,” said Goldsby. “The supply chain world continues to get battle-tested with an environment fulfilling the VUCA (volatile, uncertain, complex, ambiguous) prophecy. In fact, we’re acting more like financial managers these days in supply chain management by valuing upside potential and downside risks routinely in our day-to-day activities.”
In an October earnings call, Forward Air CEO, president and chairman Tom Schmitt insisted that “we should be getting out of the circus and into our business 100 percent full-time as quickly as possible.” At the time, Schmitt said the company would further penetrate the LTL freight market via organic growth, rather than with Omni’s multimodal logistics services across. air, ocean and ground.
But now, Schmitt is singing a different tune.
“We have always believed in the power of this acquisition and are pleased to have found a way forward,” said Schmitt in the Monday statement. “In recent days, we have engaged constructively with Omni to set a path forward that ends our legal dispute.”
J.J. Schickel, CEO of Omni Logistics and incoming president of Forward Air, shared his excitement with the deal, saying “Combining with Forward Air creates an unparalleled opportunity to reshape the industry and become the best possible strategic partner to our customers.”
