{"id":777451,"date":"2023-08-13T17:03:03","date_gmt":"2023-08-13T21:03:03","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/forward-air-reiterates-value-creation-potential-of-acquisition-of-omni-logistics\/"},"modified":"2023-08-13T17:03:03","modified_gmt":"2023-08-13T21:03:03","slug":"forward-air-reiterates-value-creation-potential-of-acquisition-of-omni-logistics","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/forward-air-reiterates-value-creation-potential-of-acquisition-of-omni-logistics\/","title":{"rendered":"Forward Air Reiterates Value Creation Potential of Acquisition of Omni Logistics"},"content":{"rendered":"

<\/p>\n

Forward Air Reiterates Value Creation Potential of Acquisition of Omni Logistics<\/b><\/p>\n

Publishes Investor Q&A and Supplemental Presentation<\/i><\/p>\n

GREENEVILLE, Tenn.–(BUSINESS WIRE<\/a>)–
\nForward Air Corporation (NASDAQ: FWRD) (\u201cForward\u201d) today published Q&A and a supplementary investor presentation to provide additional information about the previously announced transaction with Omni Logistics (\u201cOmni\u201d). All related materials are available at ir.forwardaircorp.com<\/a>.<\/p>\n

\n\u201cThe transformational combination with Omni is the natural next step in our Grow Forward strategy to expand our customer base and will deliver significant long-term value for Forward Air shareholders,\u201d said Tom Schmitt, Chairman, President and Chief Executive Officer of Forward. \u201cThis transaction will advance Forward\u2019s category leadership in the expedited LTL market by making high-value, competitively priced freight accessible to more customers. We also expect the combined company to benefit from an enhanced financial profile with significantly increased revenue and growth, supported by meaningful synergies. We look forward to continuing to engage with the investment community to communicate the benefits of this transaction.\u201d<\/p>\n

\nThe full contents of the Q&A follow:<\/p>\n

Q: What is the strategic rationale for this acquisition? How does it further strengthen Forward\u2019s status as an LTL provider of choice?<\/b><\/p>\n

\nThe combination of Forward and Omni creates a scaled, premier, less-than-truckload (\u201cLTL\u201d) enterprise focused on providing customers with multimodal solutions for complex and high-service freight needs.<\/p>\n

\nThe integration of Omni will drive high-margin freight to Forward\u2019s LTL network and provide Forward with direct access to more than 7,000 customers in high-growth, high-value end industries and an increased domestic footprint. Forward will have a broader portfolio of essential logistics services, the majority of which will help drive incremental freight into Forward\u2019s LTL network. Omni\u2019s customer base has significant domestic LTL requirements, and will benefit from Forward\u2019s LTL Precision Execution, which provides customers with the fastest transit times, best on-time performance, and lowest claims rates in the industry.<\/p>\n

\nThe acquisition will drive significant cost and revenue synergies, be accretive to Forward\u2019s long-term growth and double its scale on a larger, denser freight network.<\/p>\n

Q: Why Omni Logistics? What percentage of their business is LTL?<\/b><\/p>\n

\nOmni delivers time-sensitive high-value freight and provides supply chain and logistics solutions into and throughout North America with a scaled platform and sizeable existing retail sales force. In addition, Omni has a strong track record of execution, having doubled revenue on an organic basis since 2020.<\/p>\n

\nApproximately 35% of Omni\u2019s business comes from LTL freight, and Omni\u2019s sales force often uses Forward\u2019s network.<\/i> The transaction is complementary and combining Omni\u2019s retail generated LTL business with Forward\u2019s wholesale network will capture both Omni and Forward\u2019s margins for the same topline revenue.<\/p>\n

Q: How does this transaction impact Forward\u2019s existing customer relationships?<\/b><\/p>\n

\nForward\u2019s team knows its customer base well. It is a dynamic time in the freight marketplace and this transaction positions Forward to meet the increased need for reliable LTL solutions, including by adding deep retail sales expertise to an already strong wholesale sales and account management team.<\/p>\n

\nThe acquisition removes an organization\u2019s gross margin between shipper and destination, allowing Forward to go directly to shippers while maintaining and growing with historic wholesale customers. It also positions Forward for long-term growth of its LTL business model for shipments of consequence by expanding the customer base to include shippers, 3PL, forwarders and airlines.<\/p>\n

\nTo drive growth in both the wholesale and retail markets, Forward will go to market with two sales organizations with channel expertise. The combined company\u2019s strong commercial engine enables pro-active cross sell revenue synergies in LTL along with complementary Omni services.<\/p>\n

\nSince the announcement, feedback from many customers of both companies has been highly favorable. Forward and Omni share the same relentless focus on delivering best-in-class service to customers, and both companies are excited to advance that reputation together.<\/p>\n

Q: What are the expected synergies?<\/b><\/p>\n

\nThe combination is expected to generate opportunities to realize up to $125 million of total run-rate EBITDA synergies (excluding approximately $36 million of non-recurring costs to achieve those synergies). This includes up to approximately $75 million of potential run-rate cost synergies, up to 80% of which are expected to be realized within the first six months following close and the remainder of which are expected to be realized by the end of 2025. Total synergies also include up to $50 million in positive revenue-based EBITDA synergies, approximately 60% of which would be realized in the 24 months post-close of the transaction1<\/sup>.<\/p>\n

\nWith the combination of both Forward and Omni\u2019s margins for the same topline revenue, the majority of the projected revenue synergies are expected to drive a higher margin for the combined company.<\/p>\n

\nTaken together, the company expects to realize 30% of the revenue-based EBITDA synergies in year one, 60% in year two and to fully realize them by the end of year three post-close.<\/p>\n

Q: What is the path to integration? How much execution risk do you expect?<\/b><\/p>\n

\nForward has a proven integration track record and a dedicated team of representatives from both companies are working together on a comprehensive integration plan so we can hit the ground running when the transaction closes. Forward and Omni have worked together as partners for many years, and already have a good understanding of each company\u2019s complementary strengths, including service offerings, teams, geographic footprint and capacity.<\/p>\n

\nApproximately 60% of cost synergies are from network optimization. The remaining cost synergies will come from facilities consolidation, SG&A rationalization, technology enhancement and insourcing Omni\u2019s third-party domestic transport spend.<\/p>\n

\nRevenue synergies will be derived from a plan centered on cross-selling potential by delivering Forward\u2019s expedited LTL network into Omni\u2019s customer base, growing expedited LTL share by combining Forward\u2019s LTL direct sellers with Omni\u2019s business development team, and best-in-class account management that is demonstrated with a 98% customer retention rate.<\/p>\n

\nForward is confident in its ability to sell its expedited LTL network to the Omni customer base given the combined salesforce is already trained in selling LTL and now has a significantly larger platform to market.<\/p>\n

Q: When will the transaction be accretive to Forward\u2019s earnings and how accretive will it be?<\/b><\/p>\n

\nWhile the transaction is expected to be 5% dilutive to cash EPS in 2024 (the first full year after closing), it is expected to be highly accretive in 2025, delivering accretion of 9% based on projected realized synergies.<\/p>\n

Q: What will be the ownership structure of the combined company?<\/b><\/p>\n

\nOmni shareholders will receive at closing 16.5% of Forward\u2019s common equity (on a fully diluted, as exchanged basis) and non-voting perpetual convertible preferred equity that, if Forward\u2019s shareholders approve conversion following closing, will automatically convert into an additional 21.2% of Forward\u2019s common equity (on a fully-diluted, as exchanged basis). In total, Omni shareholders will receive 15.8 million shares of Forward common stock if shareholders approve the conversion of the preferred equity (representing 37.7% of Forward\u2019s common equity on a fully-diluted, as exchanged basis).<\/p>\n

\nImportantly, Omni\u2019s two largest shareholders, Ridgemont Equity Partners (\u201cRidgemont\u201d) and EVE Partners, LLC (\u201cEVE\u201d), have a vested interest in the successful upside of Forward due to the predominantly stock consideration with a fixed number of shares. Overall, Omni shareholders are rolling more than 90% of their equity into Forward and will face any go-forward risk alongside Forward\u2019s other shareholders. On an as-converted basis, no individual Omni shareholder or group of affiliated Omni shareholders will own more than 13% of the pro forma company.<\/p>\n

Q: What are the mechanics of the preferred stock conversion and will there be additional dilution to existing Forward shareholders following the conversation of the convertible preferred stock?<\/b><\/p>\n

\nThe Forward stock consideration payable to Omni\u2019s shareholders will consist of common stock and a newly designated series of perpetual non-voting convertible preferred stock (the \u201cpreferred stock\u201d).<\/p>\n

\nThe shares of the preferred stock will be automatically converted into Forward common stock if conversion is approved by Forward shareholders following the closing of the transaction. If approved for conversion, the convertible preferred shares will be converted on a one\u2010for\u2010one basis into Forward common stock, representing an additional 21.2% of Forward\u2019s common equity on a fully-diluted, as exchanged basis and the preferred stock will be cancelled.<\/p>\n

\nIn addition, the number of shares, including those underlying preferred stock, issued to Omni shareholders is fixed at signing and does not change based on Forward\u2019s stock price.<\/p>\n

Q: What is Forward\u2019s target leverage ratio? How quickly do you expect to achieve that following the transaction?<\/b><\/p>\n

\nThe combined company will have a gross leverage of approximately 3.5x and net leverage of approximately 3.3x, in each case inclusive of run-rate cost synergies2<\/sup>. Strong cash flow generation is anticipated to drive rapid de-leveraging to below 2.0x by the end of 2025 based on projected realized synergies at the time.<\/p>\n

\nBoth Forward and Omni are highly cash generative with minimal capital expenditure, at approximately 2% of revenue, and historical cash conversion rate of approximately 80-90% over the past three years3<\/sup>. The combined company has a projected BB credit rating profile in line with select other freight sector peers.<\/p>\n

\nForward has historically maintained minimal leverage and as a matter of policy, will seek to de-lever and maintain leverage below 2.0x.<\/p>\n

Q: What are the conditions to close the transaction?<\/b><\/p>\n

\nThe transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of 2023. The transaction is subject to the receipt of regulatory approvals and the satisfaction of other customary closing conditions.<\/p>\n

\nThe merger agreement also contains customary termination rights, which will be further described in Forward\u2019s current report on Form 8-K.<\/p>\n

Advisors<\/b><\/p>\n

\nMorgan Stanley & Co. LLC and Citi are serving as financial advisors to Forward, and Cravath, Swaine & Moore LLP is serving as legal counsel.<\/p>\n

About Forward Air<\/b><\/p>\n

\nForward Air is a leading asset-light provider of transportation services across the United States, Canada and Mexico. We provide expedited less-than-truckload (\u201cLTL\u201d) services, including local pick-up and delivery, shipment consolidation\/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals. In addition, we offer final mile services, including delivery of heavy-bulky freight, truckload brokerage services, including dedicated fleet services; and intermodal, first-and last-mile, high-value drayage services, both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services. We are more than a transportation company. Forward is a single resource for your shipping needs. For more information, visit our website at www.forwardaircorp.com<\/a>.<\/p>\n

Note Regarding Forward-Looking Statements<\/b><\/p>\n

\nThis press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements may reflect Forward\u2019s expectations, beliefs, hopes, intentions or strategies regarding, among other things, the potential transaction between Forward and Omni, the expected timetable for completing the potential transaction, the benefits and expected cost and revenue synergies of the potential transaction (including the timing for realizing any such synergies and the conversion of revenue synergies to adjusted EBITDA) and future opportunities for the combined company, as well as other statements that are other than historical fact, including, without limitation, statements concerning future financial performance, future debt and financing levels (including the achievement of targeted deleveraging within the expected time frames or at all), investment objectives, implications of litigation and regulatory investigations and other management plans for future operations and performance. Words such as \u201canticipate(s),\u201d \u201cexpect(s)\u201d, \u201cintend(s)\u201d, \u201cplan(s)\u201d, \u201ctarget(s)\u201d, \u201cproject(s)\u201d, \u201cbelieve(s)\u201d, \u201cwill\u201d, \u201caim\u201d, \u201cwould\u201d, \u201cseek(s)\u201d, \u201cestimate(s)\u201d and similar expressions are intended to identify such forward-looking statements.<\/p>\n

\nForward-looking statements are based on management\u2019s current expectations, projections, estimates, assumptions and beliefs and are subject to a number of known and unknown risks, uncertainties and other factors that could lead to actual results materially different from those described in the forward-looking statements. Forward can give no assurance that its expectations will be attained. Forward\u2019s actual results, liquidity and financial condition may differ from the anticipated results, liquidity and financial condition indicated in these forward-looking statements. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management\u2019s opinion only as of the date on which they were made. These forward looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause Forward\u2019s actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, but without limitation:<\/p>\n