Forward Air and Omni Logistics clear the path to a new, revised deal

Back in August, when Greenville, Tenn.-based asset-light freight and logistics services provider Forward Air said it would be acquiring Dallas-based Omni Logistics, an asset-light, high-touch logistics and supply chain services provider owned by Ridgemont Equity Partners, the transaction was initially expected to be completed by the end of 2024.

But over the following months, issues regarding the deal arose, with Forward saying in October it believed that Omni did not comply with certain obligations of the merger agreement, adding that it believed the closing conditions of the agreement “will not be satisfied at the anticipated closing of the transactions under the Merger Agreement, and Forward will not be obligated to close,” and “As a result, Forward is considering its rights and obligations under the Merger Agreement, including potentially exercising its right to terminate the Merger Agreement.”

That led to an ongoing back-and-forth between the companies over the following months that put the completion of the deal in jeopardy.

Omni explained that it fully complied with all the required provisions of the Agreement and Plan of Merger between Omni and Forward, noting that any attempt by Forward Air to suggest otherwise is unfounded and has no basis, adding it believed the Merger Agreement was legally binding and that Omni remained 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 on October 31 it was filing a lawsuit against Forward Air to enforce the agreement. Omni said it in its complaint filed in the Delaware Court of Chancery against Forward Air Corporation that it “seeks specific performance under the Agreement and Plan of Merger between Omni and Forward Air dated August 10, 2023 (the “Merger Agreement”), requiring Forward Air to comply with its obligations to complete the transaction.”

Fast-forwarding nearly six months later to this week, it appears that the transaction will now come to fruition, with Forward Air saying that the terms of the agreement have been amended. Forward Air said that under the terms of the amended merger agreement, Omni shareholders will receive $20 million in cash, instead of the $150 million initially agreed, and 35% of Forward’s pro forma common equity (on a fully-diluted, as-converted basis), as compared to the 37.7% of Forward’s pro forma common equity (on a fully-diluted, as-converted basis) contemplated by the original agreement.

The companies’ generated roughly $3.7 billion in adjusted revenue through the 12-month period ending June 30, 2023, according to Forward.

“We have always believed in the power of this acquisition and are pleased to have found a way forward,” said Tom Schmitt, Chairman, President and Chief Executive Officer of Forward, in a statement. “In recent days, we have engaged constructively with Omni to set a path forward that ends our legal dispute. The revised agreement enables Forward to accelerate its long-term Grow Forward strategy and positions the combined company as the premier provider of choice in high-quality freight transportation. We believe this highly compelling acquisition will deliver significant long-term shareholder value and we look forward to swiftly closing the transaction so we can begin to capitalize on the many exciting opportunities ahead.”

Forward added that this agreement resolves previously announced transaction litigation between the companies, with a transaction closing by the end of the week expected.

Established in 2000, Omni provides shippers with various offerings, including domestic and international freight forwarding, fulfillment services, customs brokerage, and distribution and value-added services for time-sensitive freight to U.S.-based companies on a domestic and international basis.

The companies cited myriad benefits of this transaction, in August including:

• creating a scaled, premier, high-value, less-than-truckload enterprise focused on offering shippers with multimodal solutions for complex, high-service and high-value freight needs;
• integrating Omni’s state-of-the-art commercial engine providing Forward with access to more than 7,000 customers, an increased domestic footprint, and a full portfolio of logistics services, multimodal operations, and supply chain services; and
• Omni’s customers seeing benefits from Forward’s Precision Execution, providing customers with some of the fastest industry transit times, on-time performance, and lowest claim rates, among other benefits

A key strategic benefit of this transaction identified by the companies includes advancing category leadership in expedited LTL freight in the roughly $15 billion expedited LTL total addressable market, with Forward servicing $1 billion of this market. They added that the combined company will see benefits from a direct-to-market salesforce and increased footprint.

Other cited strategic benefits included: the combined company offering complementary services, including expedited services, intermodal transfer, truckload brokerage, and warehouse and distribution capabilities, coupled with the long-term growth of Forward’s LTL business being a competitive differentiator for the combined company; enhancing platform scale; combining industry-leading teams; expanding its geographic footprint and capacity to better serve the its LTL network; and expanding Forward’s expedited freight customer base.

In an August 2023 interview, Forward’s Schmitt told LM that there is about $15 billion worth in the U.S. alone in high-value freight shipments of consequence that is not patio furniture, saying that for that fourth piece Forward has always dealt with intermediaries in the past, people who sell to make it to shippers, but not to the shippers directly.

“[In 2021], we started a small direct sales force that actually sold to small-medium-sized businesses (SMB) directly,” he said. “And we have made some inroads, but we have consistently thought about how can we actually get to more of that $15 billion high-margin prize of that LTL kind of high-quality freight because we only have about $1 billion, or 7% market share, off that $15 billion prize. Yes, we can continue building our small, direct sales force and perhaps make $20 million in revenue one year, the second year, $50 million, $100 million the third year. But it's going to take a long time to get commercially in that in that pocket. In fact, it took us four decades to become operationally the best in the industry. And this is where this deal comes in. We looked left and right. And then we saw a company, Omni Logistics, that is the best in selling high-value freight to shippers.

And that's where it dawned on us, and it dawned on them that we have the best operations for machine handling high-value freight. They are the best commercial machine selling high value freight. If you put the two of them together, you have a powerhouse that should be the lead category leader in North America handling high value freight from the selling process all the way to getting it to peoples’ destinations. And, so, we just being in the industry, saw something here, where you could get those two complimentary halves—operations excellence and commercial engine—together. And they have been a good growing customer of ours. This is why we know that their freight focus is the same as ours. And that's why we know that in watching them and working with them, they're one of our top five largest LTL customers today. So, we know them quite well, and the first-hand experience, in terms of best-in-class operations and best-in-class commercial is not something that we know through somebody else about. We actually have worked with this company firsthand for the last several years.”