?? Downfall of Forward Air
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Happy Friday. Today’s highlights: RXO celebrates its merger with Coyote Logistics, and Forward Air faces a potential sale after the Omni acquisition. Plus, Marten reports low earnings for Q3, the proposed truck ban at the Bridge of Americas, and the Supreme Court's case on marijuana testing for drivers.
??AI in Carrier Sales: Check out this week's FreightCaviar Podcast with Paul Singer, CEO of Fleetworks.ai, on how AI is reshaping carrier sales.
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?? WHAT’S COOKIN’ IN FREIGHT
?? RXO & Coyote Logistics Celebrate Merger at NYSE.?RXO marked a special moment by ringing the bell at the New York Stock Exchange (NYSE) on Wednesday, officially celebrating their merger with Coyote Logistics. In an interview with NYSE TV Live, CEO Drew Wilkerson shared that just three weeks into the integration, the process is going "phenomenal" from both a morale and relationship-building perspective. The merger has already doubled the freight available to carriers on their platform, giving them more options for their next load. Wilkerson also emphasized that acquiring Coyote at the bottom of the market cycle puts RXO in a strong position for future growth. Jeffrey Silver, former Founder & CEO of Coyote, congratulated Wilkerson and the team on LinkedIn, saying,?"Great job Drew - and great to see our former Coyotes smiling up there - Congrats!"
?? Feds Propose Permanent Ban on Tractor-Trailers on Bridge of America. The US General Services Administration (GSA) has proposed a $700 million plan to ban tractor-trailers from El Paso's Bridge of the Americas, sparking a ton of criticism from trade officials. The plan, part of an infrastructure upgrade, would redirect approximately 500 daily northbound trucks to nearby bridges, which could be “catastrophic” according to Manuel Sotelo (Vice President, Mexico National Chambers of Freight Transport, Juarez Chapter). Supporters, including local El Paso officials, back the ban to reduce air pollution in residential areas. Opponents fear economic disruption, particularly for Juarez's maquiladoras (their export factories). The project is scheduled for 2026, with construction expected to halt truck traffic for three years.
?? Trucking, THC, & the Supreme Court. The Supreme Court recently heard arguments about the complex legal issue of truck drivers and marijuana testing. Douglas Horn, a former driver, took a CBD product, Dixie X, after being assured it was THC-free, only to fail a drug test and lose his job. His case against the makers of Dixie X, centering on whether he can claim triple damages under the RICO Act, made it to the highest court. The case looks at whether Horn’s lost earnings from his firing can be considered “damages” under RICO or simply the result of a personal injury.
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The Downfall of Forward Air
If you thought HBO’s Succession had the market cornered on corporate drama, Forward Air might just be giving it a run for its money. The latest news points to a sell-off as the company has retained two investment bankers. Here's a recap if you haven't been following the latest episodes.
The Omni Acquisition: What Went Wrong?
Forward Air completed its acquisition of Omni Logistics in January 2024 for $2.1 billion—quite a bit below the initial $3.2 billion price tag. Shortly after the announcement, trouble began brewing. Forward Air claimed Omni had misrepresented its financials, and even delayed key financial disclosures.
In the end, Forward Air had to make serious adjustments to the deal just to keep it on life support. The cash payment was slashed from $150 million to $20 million, and the equity stake was adjusted to make up for the chaos.
Essentially, Forward Air wanted out of the deal at one point, but with so much invested, they trudged ahead.
Stock Price Rollercoaster
And then came the stock market's judgment. Forward Air’s stock tumbled after the acquisition announcement, dropping from around $60 per share all the way to $11.21 at its lowest point. The market was clearly spooked, with shareholders worried about the long-term health of the company. That plummet sent the leadership into crisis mode.
However, the stock didn’t stay down forever. As the leadership worked to fix the Omni deal, shares started climbing again. In just five days, the stock rocketed 30%, reflecting some regained investor confidence—but things still looked rocky.
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Leadership Shakeup – CEO Exits
As the dust settled on the deal, another hit: Forward Air’s CEO, Tom Schmitt, made an abrupt exit. Was he pushed or did he jump? No one knows for sure, but he was replaced by Chief Legal Officer and Secretary Michael Hance as interim CEO. Meanwhile, Chief Operating Officer Chris Ruble was named President after assumed pick Omni CEO J.J. Schickel didn't take on the role.
The revolving door in the C-suite only added fuel to the drama, and rumors started swirling about what was next for Forward Air.
Now What? A Sell-Off on the Horizon?
Alta Fox, holding 3% of Forward Air’s stock, recently called for a formal sales process, with approximately 25% of shareholders echoing the sentiment.
Biting Words
Connor Haley of Alta Fox's letter to Forward Air board members began rather strongly, reading, "We view your disastrous track record of ignoring shareholders' views as abhorrent." Ouch.
"Let’s be clear: the debacle of the Omni Logistics LLC acquisition was a failure of?your leadership." the letter continued (underline is original).
Clearlake Capital (14% equity holder) and other investors like Irenic Capital and Ancora Advisors (7% combined) appear to back those words.
Why a sale? Some investors suggest a private equity sale could address the company’s $1.7 billion debt, which currently sits at 5.2x adjusted earnings—a high-risk ratio.
"Taking this step will not only unlock the Company’s full potential, but also help reverse damage from the poor decisions that have plagued your tenure. This is your moment to take a step forward and show you are capable of acting in shareholders' best interests."
As reported by FreightWaves, it looks like Forward Air is giving in to that pressure: the company has hired two prominent investment banking firms to explore strategic options, including a potential sale. So it's clear the company is seriously evaluating its future, though no final decisions have been made yet.
We're glued to the screen with popcorn at hand to see what happens next.
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?? AROUND THE FREIGHT WEB
??Marten’s Q3 Update. John Kingston shared his thoughts on Marten Transport, stating despite bad earnings (net income 5 cents a share), Marten’s stocks are up 1% (consensus forecast of 8 cents).
?? Industry Faces Uncertain Holiday Season. Despite early shipping increases, J.B. Hunt warns that excess capacity and weak pricing may continue to challenge the freight market during the holiday season.
?? Auger's Potential. Logistics tech consultant Anthony Miller sees Auger, led by ex-Flexport and Amazon exec Dave Clark, either revolutionizing freight tech or missing the mark. Will they go from “scapegoat” to G.O.A.T?
?? Poultry Theft. 38-year-old Jorge Lyen Blanco-Diaz was arrested in connection with stealing $100k in poultry. He was caught thanks in part to his ankle monitor placing him at the crime scene.
? Ports Ramp Up Ahead of Election. Port operator HHLA reports a ramp-up in cargo traffic ahead of the US election. “Fear over rising protectionism” from the US is said to be the cause, said Angela Titzrath, CEO of HHLA.
?? THE FREIGHT CAVIAR CORNER
FREIGHT MEME OF THE DAY
SLM Logistics LLC
5 个月I don't think it is going to be the downfall of Forward Air. There is definitely going to be a huge shake up at the executive level for this. Some customers might start looking for other forwarders to work with. But, a lot of small to mid forwarders actually use Forward Air. So this is definitely going to be interesting to watch.