What happened
A week ago, express shipping company Forward Air (FWRD +7.81%) announced a transformative acquisition that largely left analysts scratching their heads. Investors are concerned, sending shares of Forward Air down more than 20% for the week, according to data provided by S&P Global Market Intelligence, despite the company's attempts to get Wall Street on board with its plans.
So what
Forward Air had a tough week, but the cause of the stock's troubles dates back to Aug. 10. That's the day Forward announced plans to combined with private-equity-owned Omni Logistics to create a transportation powerhouse with $3.7 billion in annual sales.
Omni is an asset-light logistics and supply chain management company that facilitates domestic and international deliveries for customers. Forward, a trucking and logistics company focused on expedited services, said the deal would help funnel Omni customers to its trucks and create a one-stop shop for logistics and delivery services.
But in the days that followed, Wall Street has mostly panned the deal. Forward shares were downgraded by at least four analysts. Baird, in moving Forward's rating from outperform to neutral, said the acquisition is "thesis-changing" and that it complicates Forward's strategy and introduces considerable extension risk.
NASDAQ: FWRD
Key Data Points
Now what
The reaction has been strong enough for Forward to take the unusual step of putting out a second press release on Aug. 13 to reiterate the "value creation potential" of buying Omni.
Forward said the deal would advance its "category leadership" in expedited less-than-truckload deliveries by making its services accessible to more customers. CEO Tom Schmitt said, "we also expect the combined company to benefit from an enhanced financial profile with significantly increased revenue and growth, supported by meaningful synergies."
Perhaps, but as the analysts note, the deal also creates a lot of added uncertainty and risk around what has been a stable, reliable business.
Assuming the deal closes, Forward management will have every opportunity to prove that its vision for the company is the correct one. But for now, investors appear to prefer to watch all of this play out from the sidelines.
