Forward Air, Omni reach settlement; merger to close soon
WILIMINGTON, Del. — The merger dispute between Forward Air and Omni Logistics was settled just before opening arguments began on Monday. The deal is expected to close in the coming days.
With a Delaware courtroom filled with lawyers and potential witnesses, the trial to decide if a once-valued $3.2 billion transaction would proceed was delayed twice before the parties indicated a deal was reached.
For several weeks now, Forward (NASDAQ: FWRD) has been attempting to terminate the agreement it entered into in August after receiving push back from investors. Forward claimed Omni didn’t fulfill certain pre-closing tasks and that it misrepresented financial projections as justification for exiting the deal.
All along, Omni maintained that it acted in good faith and completed all pre-deal requirements. It filed suit against Forward at the end of October, asking a judge to compel Forward to carry through with the transaction.
A Monday statement from Forward Air showed the amended terms. The cash portion of the transaction is now just $20 million compared to $150 million previously, and the equity portion has been reduced to 35% compared to an initial equity distribution of 37.7%.
The new deal price is now closer to $2.1 billion compared to roughly $2.4 billion in recent weeks. The shares given to Omni’s stakeholders are fixed and valued on the current share price.
“We have always believed in the power of this acquisition and are pleased to have found a way forward,” said Tom Schmitt, Forward chairman, president and CEO, in a statement. “In recent days, we have engaged constructively with Omni to set a path forward that ends our legal dispute.”
The trial was originally slated to start Friday but was delayed by inclement weather, presumably leaving the parties the weekend to hash out details.
There is no remaining litigation between Forward and Omni, the release said.
“We believe this highly compelling acquisition will deliver significant long-term shareholder value and we look forward to swiftly closing the transaction so we can begin to capitalize on the many exciting opportunities ahead,” Schmitt continued.
Shares of FWRD jumped nearly 20% in early trading on Monday as investors were learning an agreement had been reached. However, by 11:09 a.m. EST, shares were back to where they started the day as the settlement meant the deal was proceeding, and not terminated as some had hoped.
Shares of FWRD are off more than 50% since the deal was first announced.
“Looking beyond this week, investors will need to digest what FWRD could be worth inclusive of Omni’s business and the significant deal-related debt burden, with uncertainty as to how much shareholder pressure will continue near-term after activists were unable to torpedo the deal,” Susquehanna Financial Group analyst Bascome Majors told clients in a Monday note.
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