Freight and logistics company Forward Air Corp. has acquired the logistics service provider (LSP) Omni Logistics for $150 million in cash plus stock holdings, saying the move will create the “category leader” in the expedited less than truckload (LTL) market.
Forward Air, whose stock trades on the NASDAQ exchange, purchased Dallas-based Omni from its investors Ridgemont Equity Partners and EVE Partners LLC, who hold majority stakes and will retain ownership in the combined company. It also traded a portion of its own stock to Omni shareholders.
The total cost of the deal was not disclosed, but Forward said it has obtained commitments for up to $1.8 billion of debt that will be used, together with cash on hand, “to refinance existing indebtedness of Forward and Omni and pay the consideration and other amounts in connection with the transaction.”
The merger comes at a time when many similar logistics providers are feeling mounting stress. The trucking sector continues to struggle through the trough of a freight recession at the same time that transportation business costs are climbing due to high interest and inflation rates and a historically tight labor market. And earlier this week, fellow LTL carrier Yellow Corp. declared bankruptcy after taking on heavy debt from a series of acquisitions and loans.
Following closing of the deal, the newly combined company will be led by Forward Air’s chairman, president, and CEO Tom Schmitt—who will continue as chairman and CEO—and OmniCEO J.J. Schickel, who will become president and a member of Forward’s board of directors. Omni shareholders will also designate three additional directors to join Forward’s board.
When complete, the cash-and-stock transaction will create a combined company with $3.7 billion of revenue on paper, counting both firms’ results for the twelve months ended June 30.
Omni defines itself as an asset-light, high-touch logistics and supply chain management company that delivers domestic and international freight forwarding, fulfillment services, customs brokerage, distribution, and value-added services for time-sensitive freight to U.S.-based customers operating both domestically and internationally.
Combined with Forward Air, the new corporation will “expect to compete for an increasing share of high-quality freight transportation amidst a dynamic market in which customers are seeking a more reliable LTL solution,” the firms said. In addition, they said the combined company will benefit from higher growth and revenue predictions, “underpinned by cost- and revenue-based synergy opportunities.”
The companies did not share any details about their integration plans, but “cost synergies” is a common financial phrase that indicates the potential savings gained from a merger or acquisition, typically involving “layoffs, technological improvements, supply chain advancements, and research and development,” according to Investopedia.
“The combination of Omni with Forward creates a company positioned to achieve the full potential of our LTL business, provide a broad offering of complementary services to our customers, and deliver meaningful value for our shareholders,” Schmitt said in a release. “Forward and Omni already share a relentless focus on delivering best-in-class service to our customers, and we are excited to advance that reputation together. We also believe the combination will allow us to unlock significant growth through enhanced scale, execution, and operational synergies. We look forward to benefitting from Omni’s unique capabilities and expertise and to bringing even greater value into the expedited freight marketplace.”