Agreement to Provide up to $400 Million in
Additional Capital for Strategic Investments and Acquisitions
Jonathan Sagal, Managing Director of Starboard,
Has Joined Acacia’s Board of Directors
Company to Host Investor Conference Call Today
at 10:00 a.m. ET
Acacia Research Corporation (“we”, "Acacia" or "the Company")
(Nasdaq: ACTG) today announced a strategic partnership with
Starboard Value LP (together with its affiliates, “Starboard”), a
New York-based investment adviser with a focused and fundamental
approach to investing in publicly traded U.S. companies. This
financing (the “Transaction”) will provide Acacia with access to up
to $400 million of new capital for strategic investments and
acquisitions, and Starboard will work directly with Acacia to
identify and execute on these opportunities.
Under terms of the agreements:
- Starboard has made a $35 million investment in Acacia,
acquiring 350,000 shares of Series A Convertible Preferred Stock
(the “Preferred Shares”) convertible at $3.65 per share, a 38%
premium to Acacia’s 30-day trailing volume-weighted average price
(VWAP), and warrants to purchase five million shares of common
stock (the “Series A Warrants”) with an exercise price of $3.65 per
share.
- Acacia may issue up to $365 million in senior secured notes due
2027 with a cash interest rate of 6% (the “Notes”) to Starboard,
the proceeds of which may be used to fund investment opportunities
and strategic acquisitions approved from time to time by the
Company and Starboard.
- Promptly upon the receipt of Acacia stockholder approval (as
described below), Starboard will purchase warrants (the “Series B
Warrants”) to purchase up to 100 million shares of the Company’s
common stock at a cash exercise price of $5.25 per share or by the
cancellation of Notes, to the extent the Notes have been issued, at
an exercise price of $3.65 per share.
- Acacia has reserved the right to offer existing Acacia common
stockholders the opportunity to purchase up to $100 million in
notes and 27 million warrants on substantially the same terms of
the Notes and Series B Warrants.
- Jonathan Sagal, Managing Director of Starboard Value, has
joined Acacia’s Board of Directors, and Starboard Value has certain
other board appointment rights, as described below.
Clifford Press, Acacia’s Chief Executive Officer, commented,
“This transaction is the culmination of our work to prepare Acacia
for its next stage as a leading absolute return focused platform
for investing in intellectual property, technology, and other
unique investment and acquisition opportunities. We believe that
our strategic alliance with Starboard will allow us to pursue
opportunities of greater scale and flexibility. Starboard is an
ideal partner for us given their strong investment track record and
deep focus on operational, strategic and governance oriented
investing.”
Press continued, “We are very pleased that we will be able to
give Stockholders the option to participate in the Starboard Notes
and Series B Warrants on substantially the same terms as
Starboard.”
Al Tobia, Acacia’s President and Chief Investment Officer,
commented, “We are excited and very pleased to welcome Jonathan to
the Board and establish a close working relationship with Starboard
to accelerate our growth. This further strengthens Acacia’s new
Board of highly qualified independent directors and provides us
with access to capital and strategic insights to drive our
strategy.”
Jeff Smith, CEO of Starboard, commented, “We have a shared
vision for how Acacia can deploy capital in innovative ways to
create value for all shareholders. Clifford, Al, and the new Board
have led a substantial transformation at Acacia. They have
established an exemplary governance framework and built a
significant capital position with approximately $170 million in
cash and short-term investments and substantial net tax assets. We
believe the Acacia platform is a solid base of assets from which to
build. Together with the capital that we are providing, Acacia is
now well positioned to identify and execute on the most attractive
investment opportunities, and we look forward to working closely
with the Company.”
Transaction Overview
Under the terms of the Transaction agreements, Starboard has
purchased 350,000 Preferred Shares, with a liquidation preference
of $100 per share and an initial cash dividend rate of 3%, and
Series A Warrants to purchase up to five million shares of common
stock, resulting in proceeds to Acacia of $35 million. The
conversion price of the Preferred Shares and the exercise price of
the Series A Warrants is $3.65 (subject to price-based
anti-dilution adjustments), a 38% premium to Acacia’s trailing
30-day VWAP. These proceeds will be held in escrow until used for
an approved investment. Following the use of the proceeds to fund a
strategic investment or acquisition, the dividend rate on the
Preferred Shares will increase to 8%.
The Transaction also establishes a structure by which the
Company and Starboard may agree on approved investments from time
to time to be financed by Notes in an aggregate principal amount up
to $365 million with a 6% annual interest rate.
Acacia will seek stockholder approval for (i) the Company’s
issuance of the securities described in the Transaction agreements
(including shares of the Company’s common stock underlying the
Preferred Stock and warrants) without giving effect to any
limitations under the rules of the Nasdaq Stock Market LLC, and
(ii) an amendment to its Certificate of Incorporation to increase
the number of authorized shares of common stock to 300,000,000
shares.
After the receipt of stockholder approval, Starboard will also
purchase Series B Warrants to purchase up to 100 million shares of
common stock at a cash exercise price of $5.25 (subject to
price-based anti-dilution adjustments) until 30 months after their
issuance date. The Series B Warrants may also be exercised by the
cancellation of outstanding Notes at an exercise price of $3.65 per
share at any time after the Notes have been issued until the
maturity date of the Notes.
The Preferred Shares, Notes, and Warrants all contain
limitations on conversion or exercise, such that Starboard may not
convert or exercise its securities into greater than 4.89% of
Acacia’s outstanding common stock. The Preferred Shares contain and
the Notes, if and when issued, will contain, affirmative and
negative covenants customary for transactions of this type,
including but not limited to, limitations on the Company’s ability
to incur debt, grant liens on its assets, make certain
distributions in respect of its equity and make certain
investments.
Acacia’s Board of Directors intends to offer $100 million of
notes and warrants to purchase up to 27 million shares of common
stock, with substantially identical terms as the Notes and Series B
Warrants held by Starboard, to Acacia’s common stockholders. The
Company, subject to the Board’s discretion, intends to effect this
through one or more rights offerings to stockholders of record on
each date that an approved investment to be funded by the sale of
Notes to Starboard is announced.
The Company has entered into a Governance Agreement with
Starboard whereby Jonathan Sagal of Starboard has joined the Board
of Directors and has the right to appoint two additional directors
to the Board of Directors. The Board has established a Strategic
Committee, consisting of Clifford Press, Al Tobia, and Jonathan
Sagal, to work with Starboard to identify and execute on strategic
investments and acquisition opportunities.
Acacia has also entered into a Registration Rights Agreement
with Starboard, granting Starboard certain registration rights with
respect to the securities issued and issuable in the
Transaction.
The foregoing summary of the Transaction agreements is not
complete, does not contain a description of all terms and
conditions of the Transaction and is qualified in its entirety by
the full text of the Transaction agreements, copies of which are to
be filed on a Current Report on Form 8-K.
Investor Conference Call
The Company will host a conference call and webcast today at
10:00 a.m. ET to discuss the transaction.
To access the live call, please dial 844-602-0380 (U.S. and
Canada) or 862-298-0970 (international) and reference conference ID
81699151.
The conference call will also be simultaneously webcast on the
investor relations section of Acacia’s website at
http://acaciaresearch.com under the events and presentations tab.
Following the conclusion of the live call, a replay of the webcast
will be available on the Company's website for at least 30
days.
About Jonathan Sagal
Jonathan Sagal is a Managing Director at Starboard Value. Prior
to joining Starboard Value in June 2011, Mr. Sagal was an
investment analyst at Casablanca Capital, an investment firm
focused on shareholder activism. Previously, he was an investment
analyst at Mill Road Capital, where he focused on long-term public
and private equity investments in microcap companies, and Prentice
Capital Management, where he focused on investments in consumer and
retail companies. Prior to Prentice, he was an Investment Banking
Analyst in the Mergers & Acquisitions group at Rothschild Inc.
Mr. Sagal received an M.B.A. from Columbia Business School and
graduated from Princeton University, where he received an A.B.,
summa cum laude, in Philosophy.
About Acacia Research Corporation
Founded in 1993, Acacia Research Corporation (ACTG) invests in
intellectual property and related absolute return assets and
engages in the licensing and enforcement of patented technologies.
Acacia bridges the gap between invention and application,
facilitating efficiency and delivering monetary rewards to patent
owners. Information about Acacia Research Corporation and its
subsidiaries is available at www.acaciaresearch.com.
About Starboard Value LP
Starboard Value LP is a New York-based investment adviser with a
focused and differentiated fundamental approach to investing
primarily in publicly traded U.S. companies. Starboard invests in
deeply undervalued companies and actively engages with management
teams and boards of directors to identify and execute on
opportunities to unlock value for the benefit of all
shareholders.
Important Additional Information and Where to Find It
In connection with the Transaction, Acacia will file with the
Securities and Exchange Commission (the “SEC”) a preliminary proxy
statement and other documents relating to the Transaction and the
stockholder approvals required thereunder and may file one or more
amendments to such documents. When completed, a definitive proxy
statement and a form of proxy will be filed with the SEC and mailed
to the Company’s stockholders. INVESTORS AND SECURITY HOLDERS ARE
ADVISED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES
AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN
CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE IN THE
PROXY STATEMENT BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE TRANSACTION AND THE AUTHORIZATION AND ISSUANCE OF
SECURITIES THEREUNDER. Investors and security holders may obtain a
free copy of the proxy statement and other documents filed by the
Company at the SEC’s Web site at http://www.sec.gov. The proxy
statement and such other documents may also be obtained for free
from the Company by directing such request to Acacia Research
Corporation, 4 Park Plaza, Suite 550, Irvine, California 92614,
Attention: Corporate Secretary, Telephone: (949) 480-8300.
The Company and its directors, executive officers and other
members of its management and employees may be deemed to be
participants in the solicitation of proxies from its stockholders
in connection with the proposed authorization and issuance of
securities. Information concerning the interests of the Company’s
participants in the solicitation, which may be different than those
of the Company stockholders generally, is set forth in the
Company’s definitive proxy statement for the Company’s 2019 annual
meeting of stockholders, previously filed with the SEC on June 14,
2019, and the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2018, filed with the SEC on March 15, 2019,
as amended by Amendment No. 1 to Form 10-K on Form 10-K/A, filed
with the SEC on April 30, 2019, as well as other documents filed
with the SEC. Additional information regarding the interests of
such participants will be included in the preliminary proxy
statement, definitive proxy statement and other relevant documents
regarding the Transaction filed with the SEC when they become
available. To the extent holdings of such participants in the
Company’s securities are not reported, or have changed since the
amounts described in the proxy statements, such changes have been
or will be reflected on Initial Statements of Beneficial Ownership
on Form 3 or Statements of Change in Ownership on Form 4 filed with
the SEC.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
This news release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. These statements are based upon our
current expectations and speak only as of the date hereof. Our
actual results may differ materially and adversely from those
expressed in any forward-looking statements as a result of various
factors and uncertainties, including the ability to successfully
execute our growth strategy, the ability to successfully identify
strategic acquisitions and investments by us and Starboard, our
intention to conduct a rights offering to our stockholders, the
potential additional investments by Starboard, the ability to
obtain stockholder approval of the authorization and issuance of
securities under the Transaction, general economic conditions and
the success of our investments. Our Annual Report on Form 10-K,
recent and forthcoming Quarterly Reports on Form 10-Q, recent
Current Reports on Form 8-K, and any amendments to the forgoing,
and other SEC filings discuss some of the important risk factors
that may affect our business, results of operations and financial
condition. We undertake no obligation to revise or update publicly
any forward-looking statements for any reason.
The results achieved in the most recent quarter are not
necessarily indicative of the results to be achieved by us in any
subsequent quarters, as it is currently anticipated that Acacia
Research Corporation’s financial results will vary, and may vary
significantly, from quarter to quarter. This variance is expected
to result from a number of factors, including risk factors
affecting our results of operations and financial condition
referenced above, and the particular structure of our licensing
transactions, which may impact the amount of inventor royalties and
contingent legal fees expenses we incur from period to period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191118005480/en/
Acacia Research Investor Contact: FNK IR Rob Fink,
646-809-4048 rob@fnkir.com
Acacia Research Media Contact: Sloane & Company Joe
Germani / Kristen Duarte, 212-486-9500 jgermani@sloanepr.com /
kduarte@sloanepr.com
Starboard Contacts: Peter Feld, (212) 201-4878 Gavin
Molinelli, (212) 201-4828 www.starboardvalue.com
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