Forward Air said Monday its board has initiated a strategic review, which potentially includes selling the company or entering a merger agreement. The update comes after months of public criticism from investors, who have called on the company to engage in a sale process following its contested merger with freight forwarder Omni Logistics.
Investors have pointed to “misguided capital allocation” and poor oversight as the reasons for the Greeneville, Tennessee-based trucking company’s current financial troubles. FreightWaves reported in October that the company had retained investment bankers to explore a sale.
Forward’s (NASDAQ: FWRD) problems began shortly after it announced the acquisition of Omni in August 2023. The deal was structured through a series of transactions allowing it to circumvent a vote by shareholders, who likely would have shot down the plan given the large price tag and high debt burden the transaction carried. Investors have also railed against the equity interest ceded to Omni’s private equity stakeholders and raised concerns that the vertical integration would scare off Forward’s legacy wholesale customers.
Forward outlined a range of options on Monday but said it has no timeline on when, or if, anything will be done.
The company said it implemented an additional $20 million in cost saving initiatives during the fourth quarter by reducing head count, consolidating operations at terminals and limiting its use of third-party providers. The $20 million in annualized cost reductions is in addition to the $75 million in merger synergies previously announced, which will be realized by the end of the first quarter.
It also reaffirmed Monday its full-year adjusted earnings before interest, taxes, depreciation and amortization guidance of $300 million to $310 million. The recent cost reductions weren’t part of the prior full-year guide and were required for the company to achieve its forecast.
“During the fourth quarter, we implemented the initial phase of our broader transformation strategy to create a truly integrated and go-to solution provider, and I am very pleased with the pace and rigor we are seeing in the early days,” said CEO Shawn Stewart in a news release. “Our initial actions have primarily been focused on structural changes which streamline operations and better support our long-term growth initiatives.”
Stewart took over in late April and has since been tasked with integrating Omni’s freight forwarding platform with Forward’s expedited trucking operations. Stewart replaced Tom Schmitt, who was the architect of the ill-fated merger.
Forward also said Monday it had modified its credit agreement, lowering commitments on its revolving credit facility from $340 million to $300 million. The deal gives it more breathing room on its debt covenant. Net leverage of 6.75 times is now allowed through the 2025 third quarter, stepping down to 5.5 times in the fourth quarter of 2026 and beyond.
The company ended the third quarter at 5.4 times leverage and was facing a 4.5 times bogey by the fourth quarter of this year.
The credit facility could be reduced further, or the company could be required to make a prepayment on its term loans, if net leverage exceeds 6.5 times in any quarter, according to a separate filing with the Securities and Exchange Commission.
“This amendment is intended to provide us with additional financial flexibility to continue executing our transformation and regardless of the outcome of the strategic review process,” said CFO Jamie Pierson. “We sincerely appreciate the support of our lenders and look forward to capitalizing on the tremendous opportunity we have ahead of us.”
Pierson joined Forward in May. He has expertise in financial restructurings including two stints with now-bankrupt Yellow Corp. (OTC: YELLQ).
Goldman Sachs (NYSE: GS) is currently acting as Forward’s financial adviser. The investment banking firm was one of Omni’s advisers on the August 2023 merger. Forward was advised by Morgan Stanley (NYSE: MS) and Citi (NYSE: C) on that deal.
“Under Forward Air’s new leadership team, the Company is making tangible progress executing the Omni integration and delivering on synergy targets ahead of schedule, while stabilizing the business and advancing the early stages of transforming the Company to become a global logistics powerhouse through the implementation of its strategic plan,” said Forward Chairman George Mayes. “Regardless of the outcome of this review, Forward will not waver in its commitment to our customers to deliver consistent high-quality service.”
Shares of FWRD were off 0.4% at 11 a.m. EST on Monday compared to the S&P 500, which was up 1.2%. Shares of FWRD are off roughly 70% since the merger with Omni was announced.
