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Forward Air, a notable player in the expedited trucking industry, has reportedly enlisted two major investment banking firms to spearhead a formal sale process. This move comes in response to escalating pressure from investors following the contentious merger with Omni Logistics.

The call for action was notably amplified by an Oct. 7 letter from Alta Fox, an activist investor holding a 3% stake in Forward (NASDAQ: FWRD). The letter, supported by approximately 25% of shareholders, urged the company to address what they perceive as poor capital management and oversight issues. Clearlake Capital, which owns 14% of Forward, signaled its shift from passive to activist investor status in August by updating its SEC filings. Additional pressure has come from Irenic Capital and Ancora Advisors, collectively owning a 7% stake.

The company's stock, trading at $36.56 as of a recent Thursday, had plummeted almost 90% from its announcement of the Omni merger in August 2023, reaching a low of $11.21 in May. The recent recovery in stock price is attributed to speculation surrounding a potential sale, which investors believe could yield a premium over the current valuation.

Proponents of a sale have highlighted the benefits of private equity ownership, which they argue would provide Forward Air with the opportunity to reduce its heavy debt burden—exacerbated by the Omni deal—and to strategize away from the pressures of the public market. As of the second quarter, Forward Air carried a hefty $1.7 billion in net debt, amounting to 5.2 times its adjusted EBITDA, a ratio considered very high even among growth-driven companies.

Concerns have also been raised regarding the integration of Omni, which has proven more challenging and protracted than some shareholders are comfortable with. Alta Fox's letter emphasized the need for a formal sales process, stating that such a move would maximize shareholder value and help rectify previous management decisions.

Initially, the acquisition of Omni seemed strategic, promising to double Forward Air's size and enhance its direct-selling capabilities to shippers. This shift could potentially have doubled margins in its airport-to-airport business by eliminating middlemen. However, the merger also raised several red flags. Omni, a previous forwarding client and competitor to Forward's other customers, raised fears over potential data misuse and preferential treatment.

Investor dissatisfaction was further stoked by the lack of a shareholder vote on the Omni acquisition. Structured through multiple transactions to bypass shareholder approval, the acquisition was valued at a staggering $3.2 billion—surpassing Forward’s market cap at the time—and required assuming Omni’s $1.4 billion debt, besides conceding a 38% equity stake to Omni's private equity backers, Ridgemont Equity Partners and EVE Partners.

Despite some operational and leadership changes since finalizing the merger in January, discontent among shareholders persists. Many are now advocating for a more decisive resolution through the sale of the company. FreightWaves has reached out to Forward Air for further comments.