SAN RAMON, CA - ARC Document Solutions, Inc. (NYSE:ARC) has entered into a definitive agreement to merge with TechPrint Merger Sub, Inc., a subsidiary of TechPrint Holdings, LLC. The deal, announced today, will see each share of ARC's common stock converted into the right to receive $3.40 in cash, a 28.8% premium over the closing price on the last trading day before the acquisition proposal was made public.
The merger is expected to conclude before the end of 2024, subject to approval by a majority of ARC's shareholders and other customary closing conditions, including antitrust clearance. The agreement follows a proposal from ARC's Chairman and CEO, Kumarakulasingam Suriyakumar, in April to acquire all outstanding shares of the company not already owned by him and other members of the Acquisition Group, which collectively holds approximately 19.6% of ARC's stock.
ARC's Board of Directors, with the exception of Mr. Suriyakumar who abstained, approved the transaction based on a recommendation from an independent Special Committee. This committee, assisted by external advisors, evaluated the company's strategic options, including soliciting other potential acquirers.
Bradford Brooks, Lead Independent Director and member of the Special Committee, expressed confidence in the transaction, emphasizing its benefits for unaffiliated shareholders in terms of value maximization and immediate liquidity.
Upon completion, ARC's common stock will be delisted from the New York Stock Exchange. U.S. Bank, BMO Bank, Zions Bancorporation (NASDAQ:ZION) dba California Bank & Trust, and City National Bank, referred to as the "Lenders", are providing debt financing for the deal. Additionally, Mr. Suriyakumar and investor Sujeewa Sean Pathiratne are contributing $11 million in equity financing.
The merger agreement restricts ARC from issuing additional dividends beyond the previously announced quarterly cash dividend of $0.05 per share, payable on November 29, 2024, to stockholders of record as of October 31, 2024. Depending on the merger's closing date, the dividend will be paid accordingly.
William Blair & Company, L.L.C. and K&L Gates LLP are advising the Special Committee, while Wilmer Cutler Pickering Hale and Dorr LLP are providing external legal counsel to ARC. Houlihan Lokey (NYSE:HLI), Inc. and Loeb & Loeb LLP are advising the Acquisition Group.
This announcement is based on a press release statement and contains forward-looking statements. Investors and stockholders are advised to read all relevant documents filed with the SEC, including the proxy statement and the Schedule 13E-3, as they contain important information about the transaction.
In other recent news, ARC Document Solutions has been making headlines with its second-quarter results for 2024, which revealed a 3.8% year-over-year revenue increase, marking the highest quarterly growth rate for the company in two years. Singular Research has maintained its Buy rating on the company, with a price target of $4.70, following this financial performance. The firm has also highlighted ARC Document Solutions' current dividend yield of 6.8%, suggesting potential returns for income-focused investors.
Moreover, ARC Document Solutions reported an increase in net sales, gross margin, and adjusted earnings per share, attributing this performance to a strategic focus on digital color printing. However, the company did note a slight decline in on-site services sales. Growth was also observed in scanning and archiving services.
In addition to these developments, ARC Document Solutions received a non-binding proposal to go private at $3.25 per share, which is currently under review by a special committee of the Board of Directors. Despite expecting challenging market conditions for the second half of the year, the company remains committed to its long-term goals. This commitment is reflected in the company's anticipation of significant market demand for on-demand, short-run, high-quality printing services.
InvestingPro Insights
As ARC Document Solutions, Inc. (NYSE:ARC) prepares for its merger with TechPrint Merger Sub, Inc., investors are closely monitoring the company's performance metrics and market outlook. According to InvestingPro data, ARC boasts a market capitalization of $133.64 million and an attractive P/E ratio of 16.67, which reflects investor confidence in the company's earnings potential. Notably, the company's P/E ratio for the last twelve months as of Q2 2024 is 16.94, indicating stability in its valuation over time.
One of the InvestingPro Tips highlights that ARC has been profitable over the last twelve months, which is corroborated by a gross profit of $95.5 million and a gross profit margin of 33.41% for the same period. This profitability is a significant factor for investors considering the company's future post-merger. Furthermore, ARC has demonstrated strong returns, with a 15.04% price total return over the last three months, showcasing its robust performance in the short term.
For dividend-seeking investors, ARC is noted to pay a significant dividend, with a yield of 6.47% as of the last recorded date. This is particularly relevant as the merger agreement restricts the issuance of additional dividends beyond the previously announced quarterly cash dividend. Shareholders can take comfort in the company's ability to provide immediate liquidity through these dividends.
For those interested in more detailed analysis and additional insights, InvestingPro offers further tips on ARC, which can be found at https://www.investing.com/pro/ARC. Currently, there are five more InvestingPro Tips available that provide deeper insights into ARC's financial health and market performance.
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