(Commonwealth_ Forward Air, a prominent logistics and transportation company, is grappling with significant changes following a series of layoffs and the complex integration of Omni Logistics after their recent merger. The company has recently laid off approximately 150 employees across various roles, ranging from clerical positions to top executives. This decision is part of a broader strategy to enhance the company’s performance amidst a backdrop of shareholder dissent and operational upheaval.
Widespread Layoffs Across Forward Air
The layoffs, acknowledged by Forward Air on Monday, mark a major restructuring effort. According to multiple sources, around 150 positions have been eliminated, impacting several departments including sales and technology. A spokesperson for Forward stated, “As part of our previously announced efforts to improve Forward’s performance, we’ve made the difficult decision to initiate workforce changes through restructuring and reductions.” To support those affected, the company is offering severance packages, COBRA medical coverage, outplacement services, and other resources.
Despite these workforce reductions, Forward Air is determined to uphold its commitment to delivering top-tier customer service and maximizing value for all stakeholders.
Challenges Following the Omni Logistics Merger
The layoffs follow the contentious merger with Omni Logistics, announced on August 10th. This merger, intended to double Forward’s revenue and bolster its competitive position in the $60 billion less-than-truckload (LTL) market, was met with immediate skepticism from shareholders. Concerns centered on the high deal price and the substantial debt burden Forward incurred to finance the acquisition.
With the integration of Omni Logistics, Forward Air’s existing forwarding customers expressed unease about the potential conflict of interest. As Omni Logistics, now part of Forward, competes in the same market, there are fears that they might gain an unfair advantage due to their access to Forward’s linehaul capacity and client lists. Forward has consistently reassured customers of its commitment to maintaining “confidentiality and neutrality” between its wholesale (forwarding) and direct-selling channels.
Leadership Changes and Financial Strain
The merger has also led to significant leadership changes within Forward Air. Tom Schmitt, the former chairman and CEO who orchestrated the merger, departed from the company just two weeks after the deal was finalized. Shawn Stewart, formerly of Ceva Logistics, stepped in as the new CEO in April. To navigate the financial complexities of the merger, Jamie Pierson, an expert in restructuring and strategic planning, was appointed as the interim chief financial officer. Pierson has a track record of managing turnarounds, having previously restructured the now-defunct Yellow Corp.
Despite these strategic leadership appointments, Forward Air continues to face substantial challenges. The company’s debt-heavy balance sheet, which now includes Omni’s $1.4 billion in net debt, has attracted downgrades from rating agencies. The merger increased Forward’s net debt to 5.5 times its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past twelve months. This precarious financial position has fueled ongoing criticism from activist shareholders.
Stock Volatility and Market Reaction
The financial markets have reflected the turmoil within Forward Air. On August 9th, the day before the merger announcement, Forward’s stock traded at $110 per share. Following the news, the stock price plummeted by more than 40%, reaching a low of $11.21 in May amidst the ongoing uncertainty. Recently, the stock has shown signs of recovery, closing at $21.50 on Monday, partly driven by rumors of potential private equity interest and activist interventions.
However, the company is not out of the woods yet. Activists remain vocal, and a shareholder class action lawsuit has been filed in a Tennessee court. The lawsuit seeks to reverse the merger and seeks damages for the significant decline in the company’s market value since the deal was announced.
