Forward Air takes steps to file answer and counterclaim agains Omni Logistics in effort to squash deal

The ongoing back and forth squabble between Greenville, Tenn.-based asset-light freight and logistics services provider Forward Air and Dallas-based Omni Logistics, an asset-light, high-touch logistics and supply chain services provider, has taken another turn, according to a statement issued by Forward earlier today.

In the statement Forward Air said that it has filed under seal a counterclaim against Omni Newco LLC in the Delaware Court of Chancery relating to the transactions contemplated by the August 10 merger agreement entered into by Forward, Omni, and certain other parties.

“As previously disclosed by Forward, on October 31, 2023, Omni filed a complaint against Forward in the Delaware Court of Chancery alleging, among other things, that Forward is in breach of its obligation to close the transactions contemplated by the Merger Agreement and seeking specific performance to compel Forward to close and related declaratory relief,” said Forward. “On Friday, November 10, 2023, Forward filed its response to the complaint and a counterclaim for declaratory relief. Forward intends to file a public version of its answer and counterclaim by November 17, 2023.

Forward believes that Omni has not complied with certain of its obligations under Sections 7.03 and 7.14 of the Merger Agreement. Because of Omni’s continuous delays and repeated misrepresentations, Forward no longer believes Omni to be acting in good faith with respect to the Merger Agreement. Consequently, Forward believes the closing condition contained in Section 8.02(b) of the Merger Agreement will not be satisfied at the anticipated closing of the transactions under the Merger Agreement. Forward is seeking an order from the Delaware Court of Chancery declaring that it is not obligated to close the transaction and that it is entitled to terminate the Merger Agreement.”

As previously reported by LM earlier this month, after an October 26 announcement, in which Forward Air stated it may not go through with its planned acquisition of Omni Logistics, which was announced in August and expected to close later this year, Omni said on October 31 it is 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.”

Forward said in late October that it believes that Omni has not complied with certain obligations of the merger agreement, adding that it believes 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.”

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

As for Omni, the company said last month that it fully complied with all the required provisions of the Agreement and Plan of Merger between Omni and Forward Air dated August 10, 2023.

“Any attempt by Forward Air to suggest otherwise is unfounded and has no basis,” the company said. “Omni believes the Merger Agreement is legally binding and intends to enforce the Merger Agreement and close the transaction as expeditiously as possible. Omni remains 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.”

In an August interview with LM, Forward Air Chairman, President and Chief Executive Officer Tom Schmitt explained that, in Omni, Forward saw a company that it considered the best in selling high-value freight to shippers.

“And that's where it dawned on us, and it dawned on them that we are the best operations machine in handling high-value freight,” he said. “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.”

And he said that the deal's value-add for shippers comes in the form of what he called a very strong value proposition. 

“The value proposition is very simple,” he said. “We are among the fastest on big lanes, on-time performance and low damages claims. So…when you ship medical equipment that, in some cases, costs several hundreds of thousands of dollars, or when you ship touring equipment for national tour tours by artists throughout the country, there's a zero propensity and no tolerance for damages or for being late. For those types of value propositions, we now have a chance to get in front of those customers directly and say, 'when you have a shipment of consequence where being on time and payment being fast and having absolute best probability for intact shipments, choose Forward Air.' And that's the conversation we can now directly have once we close this transaction and become one with Omni you can that conversation directly with thousands of customers.”

But on the company’s October 31 third quarter earnings call, Schmitt said that Forward feels very strongly that the obligation to close is not there, and the termination is an option, adding that Omni has been a business partner and a good customer of Forward’s.

“We’re going to see—looking for ways to make sure that, that’s getting preserved and enhanced,” he said. “So, we are looking for a resolution, obviously, quickly.

Third quarter earnings, for Forward Air fell 82.2% annually, with net income at $9.29 million, and total operating revenue was down 18.9%, to $413.4 million.

Robert W. Baird & Co. analyst Garrett Holland wrote in a research note that breaking the Omni deal would be a clear positive and help Forward Air refocus on its core LTL business.

“Maximizing profitability of the LTL business is our preferred strategy until execution improves,” he wrote. “FWRD remains more of a special situation, pending clarity on the Omni transaction.”