Forward Air (CCJ Top 250, No. 31) continues to feel the pressure from major shareholders who are disappointed with its acquisition of logistics service provider Omni Logistics.
Alta Fox Capital Management, which holds over 3% of the company shares, publicly joined other investors in urging the LTL carrier’s board of directors to initiate a formal sales process.
In a public letter to the board this week, Connor Haley, managing partner of Alta Fox Capital Management, called the Omni Logistics acquisition a debacle and “failure of your leadership.”
The firm called out Forward Air for continuously ignoring shareholders’ views, noting that it’s time to listen to investor feedback and execute a formal sales process to maximize value for all shareholders.
Haley pointed out that major investors have publicly stated support for exploring strategic alternatives. Forward Air’s recent 80% share price rally, Haley said, reflects market anticipation of a takeover premium, not management performance. “As fiduciaries, you are obligated to capitalize on this momentum and maximize shareholder value without delay,” he said.
In response, Forward Air’s board of directors released a statement that it “acknowledges and values the perspectives of the company’s shareholders.” The company stated that it is focused on providing its services and executing its strategic plan with a “renewed sense of continuous improvement, transparency, and accountability.”
In September, a securities filing noted the resignation of Craig Carlock, COO of the Carroll Companies, who served as a director of the board. It also increased the size of the board and appointed Jerome Lorrain, who also serves as director of supply chain solution and optimization company Log-Hug, as its newest member of the board.
In its statement, Alta Fox noted that replacing the CEO and tinkering with board composition “does not absolve the majority of you who stood by while shareholder value has been destroyed.” The firm noted that the capital allocation and “reckless oversight” have caused damage to Forward Air.
Additionally, Ancora Holdings Group said in a letter to the board in August to prioritize shareholders’ interests and called for a “real review of sale options and the retention of truly independent legal and financial advisors.”
With a 4% stake in the carrier, Ancora said that if Forward Air remains in the public market, it will need to execute deal-related strategies, reduce excess costs, address its heavily leveraged balance sheet and achieve profitable growth. The firm noted that Forward Air’s new management would be burdened by the previous team’s questionable choices, putting them at a spot of having little room for mistakes as it navigates a complex turnaround in a weak freight market.
In a securities filing in August, Clearlake Capital Group, which owns a 13.8% stake, stated similar sentiments of engaging with members of the board to “review and evaluate strategic alternatives and opportunities to increase shareholder value.”
In its second quarterly earnings report, Forward Air incurred a $1.1 billion impairment charge related to the Omni reporting unit, thereby negatively impacting the quarter’s results.
During a call with analysts in August, Forward Air CEO Shawn Steward noted there’s been no significant departures or attrition in the sales forces, particularly from the legacy Omni business. “The team is invigorated, and the pipeline is increasing with high achievement rates in converting that pipeline. The Omni sales team remains a key strength.”
In the same call, CFO Jamie Pierson noted that the company’s primary assumptions for the second half of the year include reducing one-time legacy transaction and integration costs. “We expect small operational improvements, particularly in the Expedited and Omni segments, to achieve cash flow breakeven or positive.”
In Q1, Forward Air noted a 52% rise in revenue at $542 million, credited to Omni segment’s performance. However, the company also had a 51% drop in adjusted EBITDA at $29 million.