Forward Air pushes for Delaware reincorporation via merger

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Dive Brief:

• Forward Air aims to reincorporate in Delaware by merging with its subsidiary, FA-Delaware Corp., according to an April 30 security filing.
• The LTL carrier’s board of directors believes that Delaware’s business-friendly laws offer the flexibility it needs to pursue transactions that are in the best interest of its shareholders, among other corporate governance advantages.
• If the reincorporation is approved by shareholders during its June 11 annual meeting, Forward Air would maintain its operations in Greeneville, Tennessee, where it is currently incorporated.

Dive Insight:

After fallout from its Omni acquisition made for a challenging year, Forward Air began a review of strategic alternatives to maximize shareholder value in January, including a potential sale.

Now, the company’s board says the Delaware reincorporation could bolster that effort because “it would potentially facilitate broader participation by potentially interested parties in the strategic review process,” per its proxy statement.

Under the Tennessee Business Combination Act, Forward Air cannot pursue a merger with an “interested shareholder” — an individual or entity that owns 10% or more of the company’s stock — for a period of five years.

In the proxy statement, the board called out Clearlake Group, a private equity firm, which owns nearly 14% of Forward Air’s common stock. As an interested shareholder, the firm cannot engage with the company’s strategic review process, at least under Tennessee law.

However, Forward Air disclosed in its proxy that it does not have any agreement or understanding with Clearlake Group regarding the Delaware reincorporation.

As its board explores sale opportunities, Forward Air is continuing its efforts to reduce operational expenses while also changing up executive and board leadership. In December, the carrier fired President and COO Chris Ruble, and in March, it lost two of its directors, Ana Amicarella and Valerie Bonebrake.

The company’s turnaround appears to be working as its Q1 income from operations improved by $70 million year over year. It also saw pricing and margin improvements within its expedited freight segment, according to its earnings report released earlier this month.

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