Form 4: Steel Partners Group Completes Merger of Steel Connect, Inc., Resulting in Ownership Consolidation

Steel Partners Holdings L.P. and related entities have completed the merger of Steel Connect, Inc., resulting in the conversion of shares and consolidation of ownership under Steel Excel Inc.

Summary

• Steel Partners Holdings L.P. and several related entities, including WebFinancial Holding Corporation and Steel Excel Inc., have filed a Form 4 detailing changes in beneficial ownership of Steel Connect, Inc. shares.
• The filing reflects the completion of a merger where Steel Excel Sub I, LLC, a subsidiary of Steel Excel, merged with Steel Connect, Inc., with Steel Connect surviving as a wholly-owned subsidiary of Steel Excel.
• As part of the merger, each outstanding share of Steel Connect, Inc. was converted into the right to receive $11.45 in cash and one Reith CVR.
• Various conversions of preferred stock into common stock occurred, with WebFinancial converting Series C and Series E preferred stock into a total of 21,088,893 common shares, all of which were issued directly to Steel Excel.
• Warren G. Lichtenstein sold 182,526 shares to Steel Excel for $2,089,922.70, or $11.45 per share.
• Following these transactions, Steel Excel indirectly holds 28,058,690 common shares of Steel Connect, Inc.

Sentiment

Score: 7

Explanation: The document reflects a completed merger, which is a positive step for the involved entities. The sentiment is neutral to positive as it is a planned event.

Positives

• The merger simplifies the ownership structure of Steel Connect, Inc.
• The transaction provides a clear cash value of $11.45 per share for former shareholders.
• The conversion of preferred stock into common stock consolidates the capital structure.

Risks

• The document does not detail the terms of the Reith CVR, which could introduce uncertainty for former shareholders.
• The document does not detail the future plans for the merged entity.

Industry Context

This transaction represents a consolidation within the Steel Partners group, which is a common strategy for private equity firms to streamline operations and ownership.

Comparison to Industry Standards

• Mergers and acquisitions are common in the private equity space, with similar transactions often involving a cash component and a contingent value right (CVR).
• The valuation of $11.45 per share is a specific value for this transaction and would need to be compared to other similar transactions in the same industry to assess its fairness.
• The conversion of preferred stock to common stock is a standard practice in mergers to simplify the capital structure.

Related Party Transactions

• The sale of shares by Warren G. Lichtenstein to Steel Excel is a related party transaction.
• The conversion of preferred stock held by WebFinancial and Steel Excel is a related party transaction.

Stakeholder Impact

• Former shareholders of Steel Connect, Inc. received $11.45 per share in cash and one Reith CVR.
• The merger consolidates ownership under Steel Excel, impacting the ownership structure of the company.
• The merger may impact employees of Steel Connect, Inc., although the document does not provide details.

Key Dates

Keywords

merger, acquisition, beneficial ownership, share conversion, preferred stock, common stock, Steel Connect, Steel Partners, Steel Excel, Form 4