A prominent independent proxy advisory firm has thrown its support behind a campaign led by Ancora Holdings Group LLC to vote against the re-election of three board directors at LTL carrier Forward Air Corp., escalating tensions ahead of the company’s annual shareholder meeting on June 11.
Institutional Shareholder Services Inc. (ISS) now also recommends that shareholders of Forward Air — which provides ground transportation and related logistics services across North America — vote not to re-elect Board Chairman George S. Mayes, Jr., and board members Javier Polit and Laurie Tucker.
Ancora Holdings, a 4.1 percent shareholder of Forward Air, announced its proxy challenge May 7, arguing that the three targeted directors cannot be trusted to oversee the strategic review announced Jan. 6, given that they presided over the acquisition of Omni Logistics, which Ancora characterizes as disastrous. And ISS agrees.
“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 says in its May 30 Proxy Research Report obtained by Transportation Today. “Shareholders are recommended to withhold votes from Mayes, Polit, and Tucker, and vote for the remaining company nominees.”
Forward Air’s acquisition of Omni Logistics, completed in January 2024, involved a combination of cash and equity, valuing Omni at approximately $3.2 billion. The deal faced legal challenges, including lawsuits from both companies and a period of litigation, before finally closing under an amended agreement.
The acquisition of Omni Logistics was finalized in January 2024, ending the legal battle and creating a combined entity with a significant LTL presence. But there were consequences of the deal.
For instance, in the wake of the acquisition, Forward Air experienced leadership changes, including the departure of former CEO Tom Schmitt. This also resulted in a significant loss for Forward Air in the fourth quarter of 2023, including severance expenses and operational costs. Forward Air also announced layoffs as part of its cost-reduction efforts following the acquisition.
“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,” says the ISS report, noting that a vote against the three directors would “signal to the board that shareholders expect a genuine, timely, and thorough process.”
Meanwhile, Forward Air, which took on a significant amount of debt to finance the Omni acquisition, argues that removing nearly 30 percent of the board would be destabilizing to the company and the strategic process, and states that overseeing the integration and the ongoing strategic review requires the perspectives and expertise of all its nominees.
“Mayes, Polit, and Tucker bring valuable institutional knowledge to the board,” according to the company, “and are each uniquely qualified given their individual skillsets and experience. The company highlights its ongoing refreshment, including the decision of two longer-tenured directors to not stand for re-election, and the board’s nomination of a new director, Paul Svindland.”
However, ISS isn’t in agreement, saying that the circumstances surrounding the “value-destructive Omni transaction” revealed serious concerns with board processes, composition, and leadership.
“Thus, a key question for shareholders is whether the board can now be trusted to conduct a value-maximizing strategic review,” according to its report, which recommends no-votes for the three Forward Air board directors.
Ancora accolades
Also Monday, Fredrick DiSanto, chairman and CEO of Ancora Holdings Group, and James Chadwick, president of Ancora Alternatives, welcomed the ISS endorsement, calling it a validation of shareholder frustration.
“ISS has reiterated what sizable shareholders have recognized: investors are best served by removing the targeted legacy directors, who presided over critical governance failures that have contributed to immense value destruction and perpetual risk,” they said in a joint statement.
The Ancora executives further warned that the company’s ongoing strategic review could lead to more harm without a leadership overhaul.
“Mr. Mayes, Mr. Polit, and Ms. Tucker’s collective track record — from approving the disastrous Omni acquisition to effectively delaying a leading potential acquirer from participating in the current, slow-moving review — demonstrates they cannot be trusted to make decisions in the best interest of shareholders,” they said. “Quite simply, their presence on the board is a detriment to any credible assessment of alternatives.”
Calling the ISS recommendation “a wake-up call,” DiSanto and Chadwick urged the Forward Air board to pursue a value-maximizing sale process, warning: “We expect anything short of this outcome will result in a shareholder seeking to remove and replace a majority of the board.”