ZAGG Inc (Nasdaq: ZAGG) (the “Company”), a leading global mobile
lifestyle company, today announced that its Board of Directors (the
“Board”) suspended its review of strategic alternatives, which was
first publicly announced on August 6, 2019. Despite a thorough and
rigorous process conducted by the Board with BofA Securities’
assistance, during which time the Company reached out to over 60
strategic and financial parties, the Company was unable to finalize
a definitive offer at a price that was not significantly below the
current trading levels. The Board determined that stockholder value
would be better enhanced on a standalone basis than by pursuing a
transaction on the terms and pricing proposed.
“The Board is fully focused on driving stockholder value. We
have conducted a robust and thorough strategic review process over
several months, engaging with several interested parties to
evaluate the potential sale of the Company with the purpose of
maximizing value for our stockholders,” said Cheryl Larabee, Chair
of the Board. “Based primarily on the challenges the business faced
during 2019, including soft demand for smartphones, the impact from
tariffs, a more difficult than expected holiday season, and higher
than anticipated acquisition integration costs, we ultimately did
not receive an acceptable offer for the Company. After considering
stockholder views, significant internal discussion, and
consultation with our financial and legal advisors, the Board
concluded that the best interests of all stockholders are served by
continuing to focus on the execution of our strategic plan,
including opportunities to drive growth and enhance value as an
independent public company. We have the right management team in
place and see much positive momentum in the business as noted with
the record-high net sales in the fourth quarter of 2019. The Board
remains open to thoughtful stockholder feedback and all potential
value-creating opportunities, including a possible sale of the
Company in the future.”
Below is a summary of the strategic review process undertaken by
the Board.
Summary of the Strategic Review Process
During the spring and into the summer of 2019, the Company
received unsolicited approaches from a number of parties interested
in potentially acquiring the Company. In addition, during the
Company’s normal shareholder outreach discussions with both
long-term and new investors, several investors expressed,
unsolicited and unprompted by the Company, their desire that the
Company explore strategic alternatives, including the potential
sale of the Company. As part of its role to maximize shareholder
value, the Board considered both inbound interest from interested
parties as well as feedback from the current shareholder base.
Ultimately, the Board determined that it was in the best interest
of all shareholders to explore strategic alternatives and more
specifically, a potential sale of the Company. To ensure a fresh
perspective and impartial analysis, the Board engaged BofA
Securities to run a broad sales process including all likely
prospective strategic and financial buyers to ensure that a full
and fair value would be received should a sale transaction
ultimately occur.
Following the public announcement that the Company was exploring
strategic alternatives on August 6, 2019, management and BofA
Securities worked closely to begin populating a data room and
creating a confidential information presentation for distribution
to interested parties. In all, over 60 strategic and financial
parties were contacted, with over 30 parties ultimately signing a
non-disclosure agreement in order to receive a confidential
information memorandum concerning the Company.
BofA Securities and management worked closely with this group
and, ultimately, six parties (three strategic and three financial)
submitted a first-round indication of interest offer in early
October 2019. In the five weeks following the original offers,
management and BofA Securities hosted four of the parties at
Company headquarters for face-to-face management presentations and
granted them access to detailed information about the Company, its
operations, strategy, financial condition, and future prospects.
Following these management meetings, the full data room became
available to a select group of the prospective buyers and both BofA
Securities and management engaged frequently with them to answer
questions and discuss operations. As the process progressed
throughout the fourth quarter, a few of the parties, although
interested in the Company, exited the process either due to other
competing projects or the inability to secure the requisite
financing to close. In addition, the remaining interested parties
at different times expressed their desire to have final 2019
results before entering into a transaction, which pushed any
potential deal into the first quarter of 2020.
The strategic review process was public, comprehensive, and
deliberate, lasting over six months and ultimately involving over
60 parties. As noted previously, after extensive work and
discussions, none of the remaining bidders submitted a final offer
at a price that was not significantly below current trading levels.
As a result, the Board determined that stockholder value would be
better enhanced on a standalone basis than by pursuing a
transaction on the terms and pricing proposed.
Chris Ahern, Chief Executive Officer, commented, “While we
delivered a record quarter in terms of net sales, our overall
performance was below our expectations and represented a difficult
finish to a challenging year. Over the past 18 months we have
strengthened ZAGG’s position as a leader in the mobile lifestyle
category through acquisitions and organic product innovation. With
InvisibleShield®, mophie®, Gear4®, HALO®, ZAGG®, IFROGZ®, and
BRAVEN®, we have created a powerful portfolio of brands that
address key consumer needs including protection, power, audio, and
productivity. We have also enhanced our strong retail relationships
and extensive global distribution network that we are leveraging to
further expand our overall presence. In 2019, we made important
progress integrating our recent acquisitions and investing in these
businesses to drive growth. Unfortunately, a number of factors
negatively impacted the performance of our business, including
declining smartphone unit sales, higher tariffs, a more difficult
than expected holiday season, and additional operating costs from
acquired brands. Despite the recent setbacks, we are confident of
the Company’s strategic direction. Looking forward, our focus is on
continuing to drive innovation in product categories that address
consumer pain points, executing strategies aimed at increasing
market share, including capitalizing on the rollout of 5G wireless
technology, and improving profitability through optimization of our
operating expense structure and improved inventory management. We
are confident that we can deliver improved top and bottom-line
results in 2020 and over the long-term.”
Cautionary Note Regarding Forward-Looking
Statements
This press release contains (and oral communications made by us
may contain) “forward-looking statements” within the meaning of the
safe harbor provisions of the U.S. Private Securities Litigation
Reform Act of 1995. Forward-looking statements can be identified by
words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “plan,” “predict,” “project,” “target,” “future,” “seek,”
“likely,” “strategy,” “may,” “should,” “will” and similar
references to future periods. Examples of forward-looking
statements include, among others, statements we make regarding our
outlook for the Company and statements that estimate or project
future results of operations or the performance of the Company.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, the following:
- the impacts of certain environmental and health
risks, including the recent outbreak of the coronavirus (COVID-19)
and its potential impact on the Company's operations, sourcing from
China, and future demand for the Company's products for an
uncertain duration of time;
- the ability to design, produce, and distribute the creative
product solutions required to retain existing customers and to
attract new customers;
- building and maintaining marketing and distribution functions
sufficient to gain meaningful international market share for our
products;
- the ability to respond quickly with appropriate products after
the adoption and introduction of new mobile devices by major
manufacturers like Apple®, Samsung®, and Google®;
- changes or delays in announced launch schedules for (or recalls
or withdrawals of) new mobile devices by major manufacturers like
Apple, Samsung, and Google;
- the ability to successfully integrate new operations or
acquisitions;
- the impacts of inconsistent quality or reliability of new
product offerings;
- the impacts of lower profit margins in certain new and existing
product categories, including certain mophie products;
- the impacts of changes in economic conditions, including on
customer demand;
- managing inventory in light of constantly shifting consumer
demand;
- the failure of information systems or technology solutions or
the failure to secure information system data, failure to comply
with privacy laws, security breaches, or the effect on the Company
from cyber-attacks, terrorist incidents or the threat of terrorist
incidents;
- changes in U.S. and international trade policy and tariffs,
including the effect of increases in U.S.-China tariffs on selected
materials used in the manufacture of products sold by the Company
which are sourced from China;
- adoption of or changes in accounting policies, principles, or
estimates; and
- changes in the law, economic and financial conditions,
including the effect of enactment of US tax reform or other tax law
changes.
Any forward-looking statement made by us in this press release
speaks only as of the date on which such statement is made. New
factors emerge from time to time and it is not possible for
management to predict all such factors, nor can it assess the
impact of any such factor on the business or the extent to which
any factor, or combination of factors, may cause results to differ
materially from those contained in any forward-looking statement.
Readers should also review the risks and uncertainties listed in
our most recent Annual Report on Form 10-K and other reports we
file with the U.S. Securities and Exchange Commission, including
(but not limited to) Item 1A - “Risk Factors” in the Form 10-K and
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the risks described therein from time to
time. We undertake no obligation to publicly update any
forward-looking statement, whether written or oral, that may be
made from time to time, whether as a result of new information,
future developments or otherwise. The forward-looking statements
contained in this press release are intended to qualify for the
safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended.
About ZAGG Inc
ZAGG Inc (NASDAQ:ZAGG) is a global leader in accessories and
technologies that empower mobile lifestyles. The Company has an
award-winning product portfolio that includes screen protection,
mobile keyboards, power management solutions, social tech, and
personal audio sold under the ZAGG, mophie, InvisibleShield,
IFROGZ, BRAVEN, Gear4, and HALO brands. ZAGG has operations in the
United States, Ireland, and China. ZAGG products are available
worldwide and can be found at leading retailers including Best Buy,
Verizon, AT&T, Sprint, T-Mobile, Walmart, Target, and
Amazon.com. For more information, please visit the Company’s
website at www.ZAGG.com and follow us on Facebook, Twitter,
and Instagram.
CONTACT:
Investor Relations:ICR Inc.Brendon
Frey203-682-8216brendon.frey@icrinc.com
Company:ZAGG IncJeff DuBois801-506-7336jeff.dubois@ZAGG.com
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