Forward Air-Omni merger finally closes

Forward Air announced Thursday it has completed the acquisition of Omni Logistics. The transaction’s closing ends a bitter legal dispute between the two parties.

A news release said the deal, which likely closed at a total purchase price of $2.1 billion, is expected to create a “category leader in the expedited LTL market.” The initial price tag of $3.2 billion and the structure of the deal, which didn’t require a vote from stockholders ahead of closing, drew the ire of some of the company’s investors.

Shareholders were also concerned with the debt load Forward would inherit in the transaction and the potential shift in control to Omni’s stakeholders, which include private equity firms Ridgemont Equity Partners and EVE Partners. The collective group will end up holding a 35% stake in Forward (NASDAQ: FWRD) as well as four board seats, and Omni’s CEO will now be the president of the combined company.

The deal’s structure also requires Omni’s stakeholders to vote in favor of board-chosen directors in future elections, which some shareholders said will keep the current power structure in place regardless of performance. However, Forward said it would provide more details on its management structure and revamped board, as well as financial targets, when it reports fourth-quarter results next month.

Existing Forward shareholders will still have a say in the matter.

They will be asked to convert the nonvoting preferred shares allocated to Omni as part of the transaction to common, voting shares. However, failure to do so would result in the preferred shares receiving a hefty dividend.

Following criticism from shareholders, Forward attempted to exit the transaction. It alleged Omni had breached the deal agreement by not providing timely disclosure of requested financial information and that it had also misrepresented financial projections.

Omni maintained all along that it had met all pre-deal requirements and called on a Delaware court to intervene to force Forward to the closing table.

A trial that was due to start last Friday was delayed for inclement weather. On Monday, a courtroom filled with witnesses and onlookers learned that the two parties had come to terms before opening arguments commenced.

The amended deal terms showed the cash portion was reduced from $150 million to $20 million with the equity distribution being cut from 37.7% to 35%.

More than three months have passed since the transaction was expected to close, and more than five months have passed since it was first announced. Even with the litigation and public back-and-forth, Forward said “significant integration planning” has already occurred and that it’s “confident in its ability to deliver significant strategic and financial benefits from the transaction, including substantial revenue and cost synergies and operational efficiencies.”

“Together, we are now uniquely positioned to be the premier provider of choice in high-quality freight transportation to a larger customer base with an expanded domestic footprint,” Forward Chairman and CEO Tom Schmitt said.

Shares of FWRD are off 57% since the deal was announced on Aug. 10. The decline includes an 8.6% drop since Monday when investors learned the transaction would proceed.

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Editor: Todd Maiden