8-K: Arcadia Biosciences to Merge with Roosevelt Resources in All-Stock Deal

Arcadia Biosciences will combine with Roosevelt Resources in an all-stock transaction, resulting in a shift in ownership and a change of company name and focus.

Summary

• Arcadia Biosciences has entered into a Securities Exchange Agreement with Roosevelt Resources, a Texas-based oil and gas company, for a business combination.
• The transaction is an all-stock deal where Arcadia will issue approximately 12.3 million shares to Roosevelt's partners in exchange for 100% equity interest in Roosevelt.
• Post-transaction, Roosevelt equity owners will hold approximately 90% of the combined company's shares, while existing Arcadia shareholders will own about 10%.
• The combined company will be renamed Roosevelt Resources, Inc. and will trade under a new Nasdaq symbol.
• The board of directors and senior management will be reorganized, with key personnel from Roosevelt taking leadership roles.
• The transaction is expected to close in the first quarter of 2025 or soon thereafter.
• Arcadia's strategic review led to the conclusion that this business combination was the best option for shareholders.
• Arcadia has discontinued its CBD body care brands in Q3 2023 and monetized its Resistant Starch Durum Wheat trait and sold its GoodWheat brand in Q2 2024.
• Arcadia's Zola coconut water brand has seen significant growth, with revenues up 55% year-over-year in Q3 2024 and 29% year-to-date, driven by a 68% increase in retail distribution in 2024.
• Select Arcadia team members may continue to manage the ongoing operations of Zola.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant dilution for existing Arcadia shareholders and the complete shift in business focus. While the Zola brand is performing well, the overall direction of the company is changing dramatically, which introduces significant uncertainty.

Positives

• The business combination is seen as the best alternative for Arcadia shareholders following a strategic review.
• Zola coconut water is experiencing strong growth, with significant increases in revenue and retail distribution.
• The transaction is expected to provide a new direction and focus for the company.
• Roosevelt Resources has a proven track record in the oil and gas industry with a focus on enhanced oil recovery.

Negatives

• Existing Arcadia shareholders will experience significant dilution, owning only about 10% of the combined company.
• Arcadia will undergo a complete reorganization of its board and senior management.
• The company will change its name and ticker symbol, which may cause confusion for existing investors.
• The transaction is subject to shareholder approval and may not close as expected.

Risks

• The transaction is subject to shareholder approval from both Arcadia and Roosevelt.
• There is a risk that the transaction may not close or may be delayed.
• Integrating the operations of Arcadia and Roosevelt may be challenging.
• The combined company's future financial performance is subject to various risks, including oil and gas price fluctuations.
• There are risks associated with oil and gas activities, including regulatory and environmental risks.
• The combined company may face challenges in financing its operations.
• The company is subject to risks related to the level of indebtedness and periodic redeterminations of the borrowing base and interest rates under Roosevelts credit facility.
• The company is subject to risks related to the ability to generate sufficient cash flows from operations to meet the internally funded portions of its capital expenditures budget.

Future Outlook

The combined company will focus on oil and gas operations, particularly Roosevelt's RR-Googins Field, while continuing to manage the Zola coconut water brand. The transaction is expected to close in the first quarter of 2025, or soon thereafter.

Management Comments

• Arcadia's strategic review led to the conclusion that a business combination was the best alternative for shareholders.
• The company will change its name to Roosevelt Resources, Inc. and trade under a new Nasdaq symbol.
• The board of directors and senior management will be reorganized.

Industry Context

This merger reflects a strategic shift for Arcadia from agricultural biotechnology to the oil and gas sector, indicating a move away from its previous business model. This is a significant change in direction and is not typical for a company in the agricultural biotechnology space. The move is likely driven by the potential for higher returns in the energy sector.

Comparison to Industry Standards

• The merger of Arcadia Biosciences, a company focused on agricultural biotechnology, with Roosevelt Resources, an oil and gas company, is unusual and does not have a direct industry standard comparison.
• Typical mergers in the oil and gas sector involve companies within the same industry, such as ExxonMobil's acquisition of Pioneer Natural Resources, which is a consolidation of assets and expertise within the oil and gas industry.
• In the agricultural biotechnology sector, mergers and acquisitions often involve companies with complementary technologies or market access, such as Bayer's acquisition of Monsanto, which aimed to combine seed and crop protection technologies.
• The Arcadia-Roosevelt merger is a significant departure from these industry norms, representing a complete shift in business focus for Arcadia rather than a strategic expansion within its existing sector.
• The success of this merger will depend on the combined company's ability to integrate the two very different businesses and leverage the expertise of Roosevelt Resources in the oil and gas sector.

Management Changes

Stakeholder Impact

• Arcadia shareholders will experience significant dilution and a change in the company's business focus.
• Roosevelt partners will gain a majority ownership stake in the combined company.
• Employees of Arcadia may experience changes in their roles and responsibilities.
• Customers of Zola coconut water may see no immediate changes in the product or service.

Next Steps

• Arcadia will file a Registration Statement on Form S-4 with the SEC.
• Arcadia will schedule a special meeting of stockholders to vote on the transaction.
• Arcadia will mail a proxy statement to its shareholders.
• The transaction is expected to close in Q1 2025 or soon thereafter.

Key Dates

Keywords

merger, acquisition, business combination, all-stock transaction, oil and gas, enhanced oil recovery, coconut water, shareholder dilution, Roosevelt Resources, Arcadia Biosciences