An activist investor is calling on Forward Air (FWRD -3.34%) to scrap a planned $3.2 billion acquisition and focus instead on improving its internal operations. Investors bought into that concept, sending Forward shares up by as much as 7% in Tuesday trading. As of 2:30 p.m. ET, shares were still up by 4.5%.
Deal or no deal? Forward is at a fork in the road
Forward, a trucking and logistics company focused on expedited services, is working to complete a deal to acquire supply chain management specialist Omni Logistics. Forward said the deal would help funnel Omni customers to its trucks and create a one-stop shop for logistics and delivery services.
But Ancora Holdings has other ideas. On Tuesday, the activist fund said it has built a large stake in Forward Air and is opposing the deal. Ancora said it hopes to call a special meeting of shareholders to unseat members of the board, including CEO Tom Schmitt.
Ancora has been a holder of Forward shares since mid-2020, and previously reached a deal with the company that included the addition of two new directors to the board.
In a presentation, Ancora noted that Forward shares have dropped about 40% since the deal was announced, and said the Omni purchase is overpriced, adds too much debt to Forward's books, and creates integration risk. Ancora said that it believes Forward could trade at more than $100 per share in the months to come if a new board is installed and the deal is scuttled.
Is Forward Air a buy?
Ancora is correct in noting that Wall Street has reacted unfavorably to the Omni acquisition. But it is up to the courts to decide how much say shareholders have in whether the deal gets done, and up to investors to decide on whether the board should be overhauled.
The activist fund believes that under its guidance, Forward shares can trade as high as $145 in the coming years due to better capital allocation decisions and margin improvements. Management, on the other hand, obviously believes buying Omni is the best path toward value creation from here.
Either way, the stock does appear attractively priced right now. Even after Tuesday's pop, it's still trading at multiples last seen in the early days of the pandemic. Investors who can tolerate the high risk of volatility ahead as the two sides battle over Forward's future should give its shares a look.
