DEFA14A: CompoSecure to Combine with Husky Technologies in $5B Deal

CompoSecure, Inc. plans a strategic combination with Husky Technologies Limited, creating a diversified industrial compounder valued at approximately $7.36 billion.

Summary

• CompoSecure, Inc. is seeking to combine with Husky Technologies Limited, a global leader in injection molding equipment, for approximately $5.0 billion from Platinum Equity.
• The pro forma company is valued at an enterprise value of approximately $7.36 billion, representing about 11.6x 2026E Net Adjusted EBITDA of ~$635 million.
• The combination is expected to be partially financed with approximately $2.0 billion in private placements, negotiated at $18.50 per share of CompoSecure common stock.
• The David Cote Family has approximately $1.1 billion of personal capital invested in the platform, and Platinum Equity will roll over approximately $1.0 billion in equity.
• The combined entity will operate with two distinct segments: CompoSecure (metal payment cards and authentication solutions) and Husky Technologies (injection molding equipment and aftermarket sales).
• The transaction is expected to close in early Q1 2026, subject to necessary approvals, including CompoSecure stockholder approval for the issuance of shares.

Sentiment

Score: 8

Explanation: The filing presents a highly optimistic view of a strategic combination, highlighting strong market positions, significant growth potential, operational improvements, and an attractive valuation discount. While risks are mentioned, the overall tone and projected financial benefits are overwhelmingly positive.

Positives

• The platform is led by Dave Cote and Tom Knott, who have a demonstrated track record of outperformance, including at Honeywell, Vertiv, and Mirion.
• CompoSecure's performance has materially accelerated since the deployment of the Resolute Operating System in September 2024, with 3Q25, FY 2025, and FY 2026 guidance expected to be materially above market expectations.
• Both CompoSecure and Husky are market leaders in their respective industries, with CompoSecure holding ~75% global share of metal cards and Husky ~40% global share in PET injection molding systems.
• Both businesses operate in structurally growing and resilient end markets with limited cyclicality, benefiting from high recurring revenue mixes (~75% for CompoSecure, ~65% for Husky, ~70% pro forma).
• The pro forma company is projected to have a best-in-class financial profile, including M-HSD (mid-to-high single digit) organic growth, ~29% Net Adjusted EBITDA margin (with 500bps+ further expansion identified), and ~90% free cash flow conversion.
• The valuation of ~11.6x 2026E Net Adjusted EBITDA represents a significant discount (~26% to aftermarket peers, ~45% to best-in-class industrials) despite superior financial characteristics, offering potential for Day 1 appreciation and long-term compounding.
• CompoSecure's Arculus platform provides real optionality in critical authentication and digital asset markets, generating revenue and growing quickly.
• Husky's Advantage+Elite remote monitoring capabilities are a highly differentiated competitive advantage, driving efficiency gains and adoption.
• Husky's machines are engineered to meet increasing rPET (recycled PET) regulatory requirements, reinforcing its market position and driving system refresh cycles.

Negatives

• Husky experienced significant margin headwinds during COVID-19, with EBITDA margins declining from ~32% in 2020 to ~24% by 2022, largely due to poorly executed supply chain initiatives (onshoring from China to North America) that created a ~10% margin headwind.
• Husky's 2024 system sales declined, driven primarily by delays in fulfilling 2022 backlog due to COVID-19 related supply chain constraints.
• Total capital expenditures for the pro forma company are elevated in 2025-26 due to one-time incremental spend associated with the construction of Husky's new manufacturing plant in India.

Risks

• Inability to enter into binding agreements with respect to, or complete, the proposed transactions, including the combination, on favorable terms or at all.
• Inability to recognize the anticipated benefits of the proposed transactions, which may be affected by, among other things, competition, and the ability of the post-transaction business to grow and manage growth profitably.
• Costs related to the proposed transactions, including the combination.
• Changes in applicable laws or regulations.
• Risks relating to the respective businesses of CompoSecure and Husky.
• The possibility that CompoSecure and/or Husky may be adversely affected by other economic, business, and/or competitive factors.
• Forward-looking statements and projections are based on current expectations and are subject to risks and uncertainties, and actual results or outcomes could differ materially from those indicated.

Future Outlook

The combined company is projected to achieve mid-to-high single-digit (M-HSD) annual organic growth, targeting ~12.5%+ annual EBITDA growth and 100bps+ annual margin expansion through the deployment of the Resolute Operating System. CompoSecure's 3Q25, FY 2025, and FY 2026 guidance are expected to be materially above market expectations. The platform aims for a ~20% organic Internal Rate of Return (IRR) and anticipates significant opportunities for accretive mergers and acquisitions.

Management Comments

• The platform is uniquely positioned to solve monetization issues faced by large-cap sponsors, allowing for attractive purchase prices of high-quality assets and long-term compounding through operating improvement via ROS implementation.
• Both businesses possess attributes reminiscent of Dave Cote's early days at Honeywell and Vertiv when GSAH acquired it – great assets with significant identified upside through consistent deployment of the Resolute Operating System.
• The assets allow for the opportunity to create a New Honeywell – without any of the legacy liabilities.
• Dave Cote has a long and demonstrated track record of operational excellence.
• The same playbook will apply at Husky: Commercial excellence strategies and significant identified opportunities for margin expansion.
• Husky's new CEO, Brad Selleck, has fixed the sole sourcing / domestic supply chain issues, and margins are on path to full recovery and exceeding prior peaks.

Industry Context

This announcement signifies the creation of a diversified industrial compounder, combining CompoSecure's leadership in the premium metal payment card market with Husky Technologies' dominance in PET injection molding equipment. Both segments operate in industries characterized by structural growth tailwinds, such as the premiumization of payment cards and increasing global demand for PET packaging driven by consumption growth and sustainability mandates (e.g., rPET). The integration of the Resolute Operating System, a proven framework for operational excellence, is expected to drive significant value creation, mirroring past successes achieved by Dave Cote and Tom Knott in other industrial sectors.

Comparison to Industry Standards

• The pro forma company is valued at approximately 11.6x 2026E Net Adjusted EBITDA, representing a ~26% discount to aftermarket and consumables peers (median 14.6x 2026 Adj. EBITDA) and a ~45% discount to best-in-class industrials compounders (median 16.8x 2026 Adj. EBITDA).
• The pro forma company's projected ~7.5% free cash flow yield is significantly higher than key peers, which typically trade at less than ~5.0%.
• The combined entity's ~70% aftermarket/recurring revenue mix is higher than most listed peers, including Graco (40%), Lincoln Electric (52%), Nordson (56%), JBT Marel (52%), Donaldson (65%), ESAB (67%), AMETEK (23%), Illinois Tool Works (21%), Ingersoll Rand (37%), and IDEX (35%).
• The pro forma company's projected ~29% EBITDA margin is competitive with best-in-class industrials compounders such as Graco (32.4%), Nordson (32.2%), AMETEK (31.9%), Illinois Tool Works (29.3%), Ingersoll Rand (28.2%), and IDEX (27.5%).

Management Changes

Corporate Governance

Related Party Transactions

• Resolute Holdings Management, Inc. (Resolute Holdings) will receive a management fee of approximately 10% of (LTM Adjusted EBITDA Stock Compensation Expense) from the combined entity.
• The David Cote Family, through Resolute Compo Holdings LLC, has approximately $1.1 billion of personal capital invested in the platform.
• Platinum Equity will roll over approximately $1.0 billion in equity as part of the transaction.

Stakeholder Impact

• Shareholders: Potential for significant Day 1 appreciation and long-term compounding due to the transaction's discounted valuation and anticipated operational improvements. Requires approval for share issuance.
• Employees: Deployment of the Resolute Operating System across both segments implies operational changes and a focus on efficiency, potentially impacting work processes and roles.
• Customers: Enhanced product offerings and service capabilities from the combined entity, particularly with Husky's advanced remote monitoring and rPET processing capabilities, and CompoSecure's innovation in metal cards and authentication.
• Creditors: The pro forma entity is expected to have net leverage of ~3.5x based on 2025E Net Adjusted EBITDA, with a healthy balance sheet and potential for rapid de-leveraging.

Next Steps

• CompoSecure plans to file a proxy statement and other documents with the SEC to seek stockholder approval for the issuance of shares in connection with the combination.
• A special meeting will be held for the Company Stockholder Approval.
• The definitive proxy statement will be mailed to shareholders when available.
• CompoSecure's 3Q25 earnings release is expected to be issued in early November 2025.
• The combination is expected to close in early 1Q26.
• Deployment of the Resolute Operating System at Husky to drive commercial excellence and margin expansion.
• Continued investments in sales, engineering, and R&D at CompoSecure to penetrate international markets and enhance innovation.
• Husky targets 100-200bps of aggregate market growth outperformance.
• Husky aims to connect an incremental ~85% of eligible machines to its Advantage+Elite remote monitoring service.

Key Dates

Recommendation

The proposed combination of CompoSecure and Husky Technologies presents a highly attractive investment opportunity. The pro forma entity will be a diversified industrial compounder with market-leading positions in two structurally growing and resilient industries. The valuation is at a significant discount to comparable peers, implying substantial upside potential from a re-rating. The proven track record of Dave Cote and Tom Knott in driving operational excellence through the Resolute Operating System, already demonstrated at CompoSecure, provides strong confidence in future margin expansion and robust organic growth for the combined entity. The healthy balance sheet and clear path to de-leveraging further strengthen the investment thesis, making this a compelling 'strong buy' for long-term investors.

Keywords

CompoSecure, Husky Technologies, Merger, Acquisition, SEC Filing, Financial Analysis, Metal Cards, Injection Molding, PET Systems, Corporate Governance, Capital Raise, Resolute Operating System, Dave Cote, Tom Knott, Financial Projections, Market Share, Recurring Revenue, Adjusted EBITDA, Free Cash Flow, Arculus, Authentication, Digital Assets, ESG, rPET