8-K/A: Star Equity Holdings Expands into Energy Services with Alliance Drilling Tools Acquisition

Star Equity Holdings acquires Alliance Drilling Tools for $12.65 million, establishing a new Energy Services division.

Summary

• Star Equity Holdings, Inc. (STRR) acquired Alliance Drilling Tools, LLC (ADT) on March 3, 2025, for an enterprise value of $12.65 million.
• The consideration included $4.9 million in cash and 775,000 shares of Star's Series A Preferred Stock (STRRP), valued at $7.75 million based on a liquidation preference of $10.00 per share.
• ADT, founded in 2009, is a drilling equipment supply and repair company serving the oil and gas, geothermal, mining, and water-well industries, with operations primarily in Texas and Wyoming.
• ADT generated approximately $10.5 million in revenue, a 48% gross margin, and $2.4 million in Adjusted EBITDA for full year 2024.
• Star funded the cash portion of the acquisition with $2.5 million in debt financing and existing cash reserves.
• Star plans to commence a sale-leaseback process for ADT's real estate, estimated to be worth at least $3.0 million.
• Following the acquisition, Star has three business divisions: Building Solutions, Energy Services, and Investments.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with the acquisition of a profitable company and expectations for continued growth. The management commentary is optimistic, and the financial metrics are encouraging.

Positives

• ADT has a history of strong revenue and profitability growth with consistent cash generation.
• ADT's business model allows for the majority of costs to be passed directly to customers, minimizing operational expenses and risk exposure.
• The acquisition diversifies Star's operating business portfolio and establishes a scalable growth platform.
• ADT's team brings specialized industry knowledge and expertise.
• Star expects to accelerate ADT's growth through strategic investments.

Future Outlook

Star expects the momentum shift in the marketplace to continue into 2025, benefiting from increased activity from Building Solutions customers and strong demand for new projects fueled by the ongoing housing shortage and increasing acceptance of modular, factory-built construction.

Management Comments

• Rick Coleman, CEO of Star, stated they are excited about the addition of ADT and its strong revenue, profitability, and cash generation.
• Bruce McGovern, President and Founder of ADT, said they are thrilled to partner with Star to lead ADT into its next phase of growth.
• Jeff Eberwein, Executive Chairman of Star, added that ADT is an excellent fit for Star and expands Star's operating portfolio into a new Energy Services division.

Industry Context

The acquisition reflects a trend of diversification and expansion within the holding company model, with Star Equity Holdings seeking to capitalize on growth opportunities in the energy services sector. The modular construction industry is also experiencing increased acceptance due to housing shortages and efficiency gains.

Stakeholder Impact

• Shareholders can expect potential growth and diversification of Star's revenue streams.
• Employees of ADT can expect continued operations under the Star Equity Holdings umbrella.
• Customers of ADT can expect continued service and potential expansion of offerings.
• Suppliers of ADT can expect continued business relationships.

Next Steps

• Star plans to commence a sale-leaseback process for ADT's real estate.
• Star will integrate ADT into its Energy Services division.
• Star will continue to pursue growth opportunities through both organic growth and acquisitions across all divisions.

Key Dates