Forward Air looks for a fresh start in Delaware

Forward Air is asking shareholders to approve a plan to reincorporate from Tennessee to Delaware. The calculated move would provide the troubled trucking and logistics company with improved optionality as it navigates a strategic review following the fallout from a controversial merger with Omni Logistics. One potential outcome from the review process includes the sale of the company, which may be easier to accomplish if it is domiciled in Delaware.

A preliminary proxy statement filed with the Securities and Exchange Commission is calling on shareholders to bless the reincorporation through a merger process using a newly formed subsidiary. The plan doesn’t involve a change of ownership, nor a change in operations, and the company won’t be uprooting its headquarters located in Greeneville, Tennessee.

“The Board believes that it is essential for the Company to be able to draw upon Delaware’s well-established principles of corporate governance in making legal and business decisions while preserving important shareholder rights to which our shareholders are accustomed, in the interest of maximizing long-term shareholder value,” a Thursday filing said.  

The new plan, which the board approved on Tuesday, would likely ease the path to a sale as it could garner “broader participation by potentially interested parties as the Board considers strategic alternatives.”

A transaction could include Clearlake Group, which the filing showed held 13.8% of Forward’s outstanding shares last year (a 12.6% stake at the end of year, according to Yahoo Finance) and previously advised Forward’s board of its status as an “interested shareholder” for the purposes of business combinations.

Tennessee law has restrictions on business combinations with interested shareholders, which it identifies as holding 10% or more of a company’s equity. Delaware has similar restrictions, but the interested shareholder designation starts at 15% ownership.

Forward (NASDAQ: FWRD) has seen its share price drop by as much as 90% since the company announced the merger in 2023. The deal, which was structured through a series of transactions to circumvent a shareholder vote, was challenged in court. Even Forward looked to exit the deal as pressure from investors mounted.

Forward and Omni came to terms in early 2024, leaving Forward saddled with substantial debt. Forward ended 2024 at a 5.5 times net debt leverage ratio but gained additional breathing room by amending its credit agreement. It isn’t required to meet the 5.5 times leverage threshold until the fourth quarter of 2026.

Some shareholders have called on the company to engage in a sale process to reverse “misguided capital allocation.” Shares are currently down 84% since the deal’s announcement.

Delaware’s corporate law framework has long been favored by public companies for its predictability and flexibility. More than half of all publicly traded companies in the U.S. are incorporated in Delaware, including the bulk of Fortune 500 companies.

Forward will report first-quarter results on Wednesday after the market closes with a call at 4:30 p.m. EDT the same day.

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