Starboard Value to invest $245M in Acacia Research, stock gains 7% premarket

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Acacia Research (NASDAQ:ACTG) stock gained 7.4% before the bell on Monday after it announced a deal with activist hedge fund Starboard Value to streamline its capital structure.

Jeff Smith’s Starboard will invest over $245M in additional capital and convert its ownership interests in Acacia (ACTG) to shares.

Starboard will exercise its 5M series A warrants at $3.65/share, which will result in ~11.5% stake in Acacia (ACTG) and ~27.5% voting interest.

Acacia (ACTG) will conduct a rights offering in Q1 2023 at $5.25/share for all shareholders and Starboard has committed to buy at least 15M shares.

The firm will offer 0.25 new shares per outstanding share, with a maximum of over 38M shares.

Starboard will exercise its remaining ~31.5M series B warrants at $3.65/share (or ~$115M).

Once the above deals close, Acacia’s (ACTG) capital structure will consist entirely of stock, eliminating $133.2M of derivative liabilities and $95M of debt and preferred stock obligations.

Starboard will receive $75M in total foregone option value payments in exchange for early exercise and early conversion of derivatives.

Acacia’s (ACTG) cash and marketable securities will be at least $390M, with the potential for ~$122M in additional cash to be raised through the rights offering.

After the above transactions and the completion of Acacia’s (ACTG) stock buyback program, the firm’s pro forma book value is expected to be $5.37/share (or $534M), with adj. book value of $5.63/share.

Starboard partner Gavin Molinelli will be appointed chair of Acacia’s (ACTG) board.

Acacia (ACTG) also said CEO Clifford Press will retire and its COO M.J. McNulty has been named interim-CEO. The board will conduct a search for a permanent CEO.

Earlier this year, Acacia (ACTG) made a bid to acquire Kohl’s (KSS) for $64/share in cash, which was rejected.

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