Proxy adviser backs activist’s move to reshape Forward Air board

A major independent proxy advisory firm is backing activist investor Ancora’s call for shareholders to vote against three Forward Air board members at the company’s upcoming annual meeting.

Institutional Shareholder Services Inc. (ISS) has recommended that Forward’s (NASDAQ: FWRD) shareholders reject the reelection of Chairman George Mayes and directors Javier Polit and Laurie Tucker, according to a Monday statement from Ancora Holdings Group.

Ancora has blamed the trio for overseeing a controversial merger with freight forwarder Omni Logistics. That deal has been publicly panned as it was structured through a series of transactions to circumvent a vote from shareholders. It also left Forward with a debt-laden balance sheet (5.3 times net debt leverage at the close of the first quarter) and ceded a 38% equity stake and voting bloc to Omni’s private equity backers.

Shares of FWRD tanked following the August 2023 deal announcement and are down 85% since.

The company acquiesced to shareholder pressure earlier this year, agreeing to undertake a strategic review of its options, which potentially include selling the company to private equity. Ancora has since accused Forward of “slow-walking” the review process, saying that it only recently executed nondisclosure agreements with interested parties.

“In light of the urgency for a well-run strategic review process, coupled with the governance failures related to the value-destructive Omni acquisition, there is a case for change at the board level,” ISS stated in its report, per the Ancora statement. “Shareholders have every right to be concerned about the likelihood of a positive outcome given the board’s track record on M&A decision making and the board’s utter disregard for investors in the past.”

A 50.1% vote is required for the three board members to be reelected. The results of the election will be confirmed at Forward’s June 11 annual meeting.

The company is also asking shareholders to approve a reincorporation from Tennessee to Delaware, which it says has a more corporate-friendly legal landscape and would make it easier to sell the company. But Ancora has claimed the move was a belated fix to the company’s changed stance on Tennessee M&A law, which precluded it from engaging with a potential buyer and thus preserving the current makeup of the board.  

Forward noted in a Friday filing with the Securities and Exchange Commission that it has been “taking into account shareholder feedback” as it explores all potential options to maximize value. It also said it has begun talks with “parties interested in participating in the process,” which presumably include potential buyers.

“The full Forward Air Board is highly qualified and actively engaged in all activities underway, including oversight of the strategic alternatives process. Removing ~30% of the Board at this time is unnecessary and would be destabilizing to the Company and the process,” a spokesperson with Forward Air said on Monday. “If Ancora is focused on an efficient strategic review process, depriving the Board of critical expertise undermines that very goal.”

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