Forward Air, Omni Logistics to combine in cash-and-stock transaction

Forward Air and Omni Logistics announced that they have entered into a definitive agreement under which Forward and Omni will combine in a cash-and-stock transaction, creating a combined company that generated approximately $3.7B of combined company adjusted revenue for the twelve months ended June 30. Under the terms of the agreement, Omni shareholders will receive $150M in cash and Forward common stock and preferred stock as described. This transaction is expected to deliver synergies through insourcing of Omni’s third-party LTL network and other domestic transport spend, capitalizing on significant cross-selling opportunities, and driving incremental cost savings. The combination is expected to generate opportunities to realize up to approximately $125M of total run-rate EBITDA synergies. Up to approximately $75M of the total anticipated run-rate synergies represent cost synergies, of which up to $60 million are expected to be realized within the first six months following close, with full run-rate cost savings expected to be realized by the end of 2025. In addition, by offering Forward’s expedited LTL service to Omni customers, the combined company will be well-positioned to capitalize on opportunities to realize up to $50M in revenue-based EBITDA synergies, which are expected to be gradually realized in the first three years post-closing of the transaction. The transaction provides increased scale, growth, margin accretion, and cash flow generation which will enhance the financial profile of the combined company. Forward expects the transaction to be accretive to cash EPS in year two following the close of the transaction. In connection with the transaction, Forward and Omni will each contribute their operating assets to a newly formed partnership that is a subsidiary of Forward. Certain Omni shareholders will hold their economic interest in the combined entity through the newly formed partnership. Omni shareholders will receive a combination of stock consideration and $150M in cash. The Forward stock consideration payable to Omni’s shareholders will consist of common stock and a newly designated series of perpetual non-voting convertible preferred stock. The shares of such preferred stock will be automatically converted into Forward common stock upon receipt of the approval of Forward shareholders in a shareholder vote to be held following the closing of the transaction. At the closing of the transaction, Omni shareholders will own 37.7% of the combined company on a fully-diluted, as-converted basis. Ridgemont and EVE will retain material ongoing ownership in the combined company and have agreed to certain lock-up and standstill provisions with respect to their equity ownership of Forward stock. Forward has obtained commitments for up to $1.85B of indebtedness consisting of term and bridge loans as well as an upsized revolving credit facility of $400M. The proceeds of the $1.85B of new debt 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 upsized revolver will be available to help fund the combined company’s working capital requirements going forward. The combined company’s leverage ratio is anticipated to be approximately 3.5x based on combined company adjusted EBITDA for the twelve months ended June 30, with significant liquidity available under the revolving credit facility. The 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.