Trucking Merger Follows Yellow Bankruptcy
Much has been made about what the future holds for the less-than-truckload (LTL) side of logistics in the wake of the Yellow Corp. bankruptcy. But it didn’t take long for one merger to establish another sizable U.S. LTL network.
Forward Air Corporation, a provider of asset-light transportation services across LTL, truckload and local pickup and delivery, has merged with multimodal air, ocean and ground logistics service provider Omni Logistics.
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The combined company will have more than 300 service locations nationwide, creating a network flywheel for customers with the addition of Omni’s 40-plus U.S. terminals, alongside Forward’s network of terminals near or at U.S. airports. Forward targets opening 30 new terminals in the U.S., Canada, and Mexico over the next five years.
Although overcapacity is still an issue in the trucking industry even after the Yellow collapse, the consolidation speaks to the race for market share across the trucking sector.
“All companies, asset, non-asset or both, must remain agile and competitive to a create a margin positive business,” said Glenn Koepke, general manager of network collaboration at supply chain visibility platform FourKites, who told Sourcing Journal that, like many others, he expects the industry to absorb the freight share Yellow left behind.
In an Aug. 3 earnings call, ahead of the acquisition and just days after Yellow shuttered operations, Tom Schmitt, chairman and CEO of Forward Air Corporation, said the company already had started to see extra business coming into its network.
“Over the last several days going into the last week of July, we do see some of our core business partners and customers who also were Yellow customers for long lanes for some of the more sensitive freight, switching that business over to us,” Schmitt said.
Jason Miller, interim chairperson, department of supply chain management at Michigan State University’s Eli Broad College of Business, believes the deal has “a lot of strategic complementarities that are rather unique,” rather than being a sign of what’s to come in the LTL industry.
“To the extent that a merger like this allows for improved efficiencies in terms of timeliness, shippers may benefit from higher service levels,” Miller said. “It is difficult to speak on the cost implications, though for expedited LTL, my guess is that service quality outweighs costs in terms of shippers’ priorities.”
Omni should be able to enhance Forward’s expedited LTL ambitions as trucking companies scramble to fill the void left by the 99-year-old business, as 35 percent of Omni’s business comes from LTL freight.
In the longer term, the addition of Omni’s presence in Europe, Asia and South America is expected to expand Forward’s international capabilities and allow it to provide extended logistics services support for global customers.
Forward said the integration of Omni will drive high-margin freight to its own LTL network and provide the company with direct access to more than new 7,000 customers in high-growth, high-value end industries and an increased domestic footprint. Omni’s customer base stands to benefit from faster transit times, improved on-time performance, and lower claims rates, Forward said.
Prior to the acquisition, as of Dec. 31, 2022, Forward said it had 6,021 owned and 705 leased trailers in its fleet. The company also had 273 owned and 643 leased tractors and straight trucks.
As part of the agreement, Omni shareholders received $150 million in cash and a 37.7 percent stake in Forward Air Corp. The combined entity would have generated $3.7 billion in revenue for the recent 12-month period and approximately $600 million in EBITDA. These numbers more than double the $1.8 billion in revenue Forward generated as a standalone business in the trailing month period,
The deal has been approved by each company board but still awaits regulatory approval. J.J. Schickel, CEO of Omni, will become president of Forward after the transaction closes, which is expected in the second half of the year.
Since the deal was announced Thursday, the company’s stock has plummeted more than 35 percent as of Tuesday’s market close.
The Omni Logistics deal isn’t the first for Forward this year. Prior to the Yellow drama, the logistics services company acquired the 300-truck full-service expedited LTL carrier Land Air Express and its five terminals for $56.5 million.
Beyond the Forward-Omni Logistics tie-up, another lower profile deal from two Indiana-based logistics and truckload companies was unveiled Monday. Online Transport Inc. has purchased A/T Transportation and Automated Logistics, Inc. for an undisclosed sum. This marks the firm’s second acquisition of 2023, and the sixth acquisition since 2019.
Forward’s ambitions have extended to autonomous trucking in partnership with self-driving technology company Kodiak Robotics, Inc. Kodiak and Forward are working on a “24/6” autonomous freight service that operates 24 hours per day, six days per week between Dallas and Atlanta, making three round trips weekly. From August 2022 through March 2023, Kodiak delivered more than 100 loads and drove more than 100,000 miles for Forward.
