Activist Ancora pushes Forward Air to consider sale, letter to board says

Forward Air (Delaware)

20/08/2024 13:00

* 
      Ancora warns of proxy fight if investor concerns are
ignored
    

        * 
      Forward Air's stock has fallen 46.5% over the last five
years
    

        * 
      Clearlake Capital Group and Irenic Capital Management also
support a strategic review
    

  
    By Svea Herbst-Bayliss
       NEW YORK, Aug 20 (Reuters) - Activist investor Ancora
Holdings is urging Forward Air  FWRD.O  to launch a strategic
review and consider a sale, and it warned that a board challenge
might follow if investors' calls for action are ignored.
Ancora, which owns a 4% stake in the freight forwarding company,
said in a letter to the board, seen by Reuters, that improving
operations, fixing the balance sheet and serving customers would
be better achieved as a private company.
    Facing the prospects of a softer freight market, a large
debt load from a recent acquisition, and a possible economic
recession, "We believe the Board must evaluate any and all
alternatives that exist today," Ancora wrote. Its letter echoed
other large shareholders' calls for change.
The company did not respond to a request for comment.
    Since January, the company has lost roughly half of its
value, Ancora noted, adding however that its underperformance
has been persistent. Over the last five years, the stock price
has fallen 46.5%. The stock closed at $31.07 on Monday.
In January, Forward Air completed its $3.2 billion purchase of
Omni Logistics, a move many shareholders criticized. In
February, CEO Tom Schmitt left. In April, Shawn Stewart was
named CEO.
    For the company and its shareholders, it would make more
sense to "announce a real review of sale options and the
retention of truly independent legal and financial advisors,"
Ancora said.
    "Running a robust process will likely spur productive
near-term discussions with interested parties, including the
many financial sponsors with holdings and expertise in the
sector," the letter said.
    Investors who own roughly more than one-fifth of Forward
Air's outstanding shares have already thrown their weight behind
starting a strategic review, the letter said.
    Last week, Clearlake Capital Group, Forward Air's
second-largest owner with a 13.8% stake, said in a regulatory
filing that it may engage with management, the board and others
to discuss strategic alternatives.
    Earlier this year, activist investor Irenic Capital
Management, which owned a 3.9% stake in Forward Air at the end
of June, called for a strategic review in a private letter to
the company, sources familiar with the matter said.
    Should management and the board drag their heels on starting
a process, Ancora hinted that a proxy fight to replace board
members could follow.
    "In the event such overwhelming consensus is ignored, we
expect there will be a formidable campaign to replace several
members of the Board – particularly those who pushed through
this year’s disastrous acquisition – at the 2025 Annual Meeting
of Shareholders," the letter said.
    The company is worth roughly $860 million and has 12
directors. It held its most recent annual meeting in June.
    Ancora first invested in Forward Air in 2020 and reached a
settlement with the company a year later that added two
directors to the board. It began building its current stake
during the second quarter, according to a regulatory filing.
    Previously, Ancora pushed for changes at freight broker C.H.
Robinson  CHRW.O , where it placed two people on the board and
helped push out a former CEO. At railroad Norfolk Southern
 NSC.N , it won three board seats in a bitter board room battle
this year.    

 (Reporting by Svea Herbst-Bayliss; Editing by Lisa Shumaker)
 ((mailto:svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: rm://svea.herbst.thomsonreuters.com@reuters.net/))