- Merger is a result of a multi-year,
publicly-disclosed strategic alternatives process
- Combination of CVRs and continuing ownership
in CSI with the post-closing Pineapple residential solar business
will provide attractive value and return to CSI shareholders
- First CVR distribution expected to be made as
soon as August 2022
-Failed merger will negatively impact CSI
current assets and may limit future CSI strategic alternatives
Communications Systems, Inc. (Nasdaq: JCS) (“CSI” or the
“Company”) today provided additional insight into the strategic
alternatives process that led to the proposed merger with Pineapple
Energy LLC (“Pineapple”) that will deliver value to CSI
shareholders if the proposed merger is approved at the special
meeting of CSI shareholders scheduled for March 16, 2022.
Shareholders can vote immediately via the Internet at
www.proxyvote.com, or by phone at +1 (800) 690-6903. Shareholders
will need the unique voting control number delivered with the
proxy. The proxy and associated control number were delivered
electronically to all brokers holding CSI shares and should be
readily accessible online at each respective brokers website.
The CSI board of directors has unanimously approved the proposed
merger and recommends that CSI shareholders vote FOR the merger
proposal and all other proposals. The special committee of the CSI
board of directors, consisting solely of independent directors
including two board members identified by the Company's two largest
shareholders, also unanimously approved the proposed merger. The
merger is the result of strategic alternatives process that was
publicly announced in May 2018.
The CSI board of directors continues to believe that the merger
with Pineapple is more likely to deliver a more favorable and
attractive value and return to the CSI shareholders than the
potential value or return that might result from other possible
strategic alternatives, including continued operation of CSI’s
S&S segment businesses, the development and execution of a
transformative plan for CSI, or a complete liquidation of CSI.
As previously described, the CVR will be distributed to
pre-merger CSI shareholders as part of the CSI board’s strategy to
deliver value to the CSI shareholders from CSI’s legacy assets.
Following the closing of the merger, CSI will distribute its legacy
cash to CVR holders in accordance with the CVR agreement as soon as
August 2022. CSI’s cash was approximately $6.4 million at December
31, 2021 and CSI’s legacy cash at the closing of the merger will be
increased by an estimated $3.44
million as a reimbursement of expenses associated with the merger
transaction. Additionally, CSI currently is targeting to close the
sale of its Minnetonka headquarters in April 2022. The net proceeds
from an April 2022 sale of the Minnetonka headquarters, after
escrows and holdbacks required by the CVR agreement, would be
available for distribution to the CVR holders also as soon as
August 2022. Therefore, the CSI board of directors is confident
that CSI shareholders will realize value from the CSI legacy assets
in 2022 in addition to the 2021 special dividend of $3.50 per
share. Also, receipt of the CVR and receipt of cash distributions
by CVR holders will occur in the same tax year.
However, if the CSI shareholders do not approve the merger with
Pineapple, CSI will be responsible for its transaction related
expenses and none of estimated $3.44 million in expenses will be
reimbursed to CSI. Additionally, CSI will continue to incur costs
to operate its S&S segment business and comply with its public
company reporting obligations until the CSI board of directors
implements one or more strategic alternatives if the CSI
shareholders do not approve the merger with Pineapple. These costs
and expenses, along with the expense associated with implementing
one or more strategic alternatives, will reduce CSI’s cash
available for any future strategic alternative, including for
distribution to CSI shareholders in liquidation if that strategic
alternative is approved by the CSI board of directors.
If the merger is not approved by CSI shareholders, the range of
strategic alternatives available to the CSI board of directors also
may be limited. The merger with Pineapple is the culmination of a
multi-year strategic alternatives process, and was determined by
the CSI board of directors to be in the best interests of the CSI
shareholders. The merger was publicly announced in March 2021 and
since that time, no alternative bidder has announced any interest
in acquiring CSI. Additionally, if the merger is not approved by
CSI shareholders, there is no assurance that CSI would be able to
identify any other private company interested in a similar reverse
merger transaction or that such a transaction would result in
comparable value to the CSI shareholders as the merger with
Pineapple, particularly when taking into account the value to the
CSI shareholders of the CVRs. In particular, CSI will face
competition from SPACs and other public companies to attract a
private company for a similar reverse merger transaction and these
SPACs and other public companies may offer cash resources, access
to financing or transaction terms that would be more favorable that
what CSI could offer. Additionally, if the merger with Pineapple is
not approved by CSI shareholders despite the unanimous
recommendation of the CSI board of directors that CSI shareholders
vote FOR the merger with Pineapple, CSI’s ability to attract
another private company for a similar reverse merger transaction
will be significantly hampered by the perception that CSI
shareholders would not support a similar reverse merger
transaction, which would also require CSI shareholder approval.
Roger Lacey, Executive Chair and Interim Chief Executive Officer
of CSI, elaborated, “CSI shareholders need to be clear-eyed about
the ramifications of a vote against the merger. If the CSI
shareholders do not approve the merger, the CSI board of directors
will consider the full range of strategic alternatives with a view
to maximizing value for our shareholders under the circumstances at
that time. However, CSI will face significant challenges in
implementing any strategic alternative, including many practical
limitations on the range of alternatives that may be available.
CSI’s standalone prospects are risky and highly uncertain and the
CSI board of directors urges you to maximize the value of your
investment in CSI by voting FOR the Pineapple merger.”
Lacey added, “CSI shareholders need to be acutely aware of the
implications of not voting. Not voting is equivalent to a vote
against the merger. Remember - every share and every vote counts!
We urge CSI shareholders to make the most of this opportunity to
get value from both the legacy CSI
assets and from the future Pineapple
business. Please vote today!”
If the proposed merger is approved, following the completion of
the proposed merger with Pineapple, CSI will be renamed “Pineapple
Holdings, Inc.”, will trade under the new Nasdaq ticker symbol
“PEGY,” and will be focused on the rapidly growing home solar,
battery storage and energy management industry. Pineapple Holdings
will initially operate primarily through its Pineapple, Hawaii
Energy Connection and E-Gear subsidiary businesses and intends to
pursue additional operating and technology acquisitions throughout
2022.
How To Vote
Please use the voting control number that accompanied your proxy
materials and vote your shares today. To have your shares
represented at the special meeting as soon as possible, please
utilize one of the following methods below:
- Vote by Internet: www.proxyvote.com
- Vote by phone: 1 (800) 690-6903
For additional questions or if you need assistance with voting,
please call our solicitor Proxy Advisory Group, LLC at: (833)
782-7141.
About Communications Systems, Inc.
Communications Systems, Inc. (Nasdaq: JCS), has operated as an
IoT intelligent edge products and services company. For more
information regarding CSI, please see www.commsystems.com.
Additional Information and Where to Find It; Participants in
the Solicitation
In connection with the proposed merger with Pineapple,
Communications Systems, Inc. (“CSI”) filed a registration statement
on Form S-4 (File No. 333-260999) with the Securities and Exchange
Commission (SEC) on November 12, 2021 (as amended, the
“Registration Statement”). The Registration Statement includes a
proxy statement/prospectus, and was declared effective by the SEC
on February 3, 2022. Beginning February 4, 2022, a copy of the
proxy statement/prospectus dated February 3, 2022 was sent to CSI
shareholders as of the close of business on January 27, 2022, the
record date established for the special meeting.
CSI URGES INVESTORS, SHAREHOLDERS AND OTHER INTERESTED PERSONS
TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS,
AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND ANY OTHER DOCUMENTS
TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER BECAUSE THEY
CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION.
The Registration Statement, preliminary and definitive proxy
statement/prospectus, any other relevant documents, and all other
documents and reports CSI filed with or furnishes to the SEC are
(or, when filed, will be) available free of charge under the
"Financial Reports" tab of the Investors Relations section of our
website at www.commsystems.com or by directing a request to:
Communications Systems, Inc., 10900 Red Circle Drive, Minnetonka,
MN 55343. The contents of the CSI website is not deemed to be
incorporated by reference into this press release, the Registration
Statement or the proxy statement/prospectus. The documents and
reports that CSI files with or furnishes to the SEC are (or, when
filed, will be) available free of charge through the website
maintained by the SEC at http://www.sec.gov.
CSI and its directors and executive officers may be considered
participants in the solicitation of proxies by CSI in connection
with approval of the proposed merger and other proposals to be
presented at the special meeting. Information regarding the names
of these persons and their respective interests in the transaction,
by securities holdings or otherwise, are set forth in the proxy
statement/prospectus dated February 3, 2022. To the extent the
Company's directors and executive officers or their holdings of the
Company's securities have changed from the amounts disclosed in
such filing, to the Company's knowledge, these changes have been
reflected on statements of change in ownership on Form 4 on file
with the SEC. You may obtain these documents (when they become
available, as applicable) free of charge through the sources
indicated above.
Forward Looking Statements
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding future financial
performance, future growth and future acquisitions. These
statements are based on Communications Systems’ current
expectations or beliefs and are subject to uncertainty and changes
in circumstances. There can be no guarantee that the proposed
transactions described in this press release will be completed, or
that they will be completed as currently proposed, or at any
particular time. Actual results may vary materially from those
expressed or implied by the statements here due to changes in
economic, business, competitive or regulatory factors, and other
risks and uncertainties affecting the operation of Communications
Systems’ business.
These risks, uncertainties and contingencies are presented in
the Company’s Annual Report on Form 10-K and, from time to time, in
the Company’s other filings with the Securities and Exchange
Commission. The information set forth herein should be read
considering such risks. Further, investors should keep in mind that
the Company’s financial results in any period may not be indicative
of future results. Communications Systems is under no obligation
to, and expressly disclaims any obligation to, update or alter its
forward-looking statements, whether because of new information,
future events, changes in assumptions or otherwise. In addition to
these factors, there are several additional factors, including:
- the conditions to the closing of
CSI-Pineapple merger transaction may not be satisfied;
- the occurrence of any other risks to
consummation of the CSI-Pineapple merger transaction, including the
risk that the CSI-Pineapple merger transaction will not be
consummated within the expected time period or any event, change or
other circumstances that could give rise to the termination of the
CSI-Pineapple merger transaction;
- the CSI-Pineapple merger transaction has
involved greater than expected costs and delays and may in the
future involve unexpected costs, liabilities or delays;
- the Company’s ability to sell its other
legacy operating business assets and its real estate assets at
attractive values;
- there is no assurance that CSI will receive
any of the maximum $7.0 million earnout relating to the August 2,
2021 sale of CSI’s Electronics & Software Segment;
- the combined company will be entitled to
retain ten percent of the net proceeds of CSI legacy assets that
are sold pursuant to agreements entered into after the effective
date of the merger;
- risks that the merger will disrupt current
CSI plans and operations or that the business or stock price of CSI
may suffer as a result of uncertainty surrounding the CSI-Pineapple
merger transaction;
- the outcome of any legal proceedings
related to the CSI-Pineapple merger transaction;
- the fact that CSI cannot yet determine the
exact amount and timing of any additional pre-CSI-Pineapple merger
cash dividends, if any, or the ultimate value of the Contingent
Value Rights that CSI intends to distribute to its shareholders
immediately prior to the closing of the CSI-Pineapple merger
transaction; and
- the anticipated benefits of the proposed
merger transaction with Pineapple may not be realized in the
expected timeframe, or at all.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220310006037/en/
For Communications Systems, Inc. Roger H. D. Lacey Executive
Chair and Interim Chief Executive Officer +1 (952) 996-1674
Mark D. Fandrich Chief Financial Officer +1 (952) 582-6416
mark.fandrich@commsysinc.com
The Equity Group Inc. Lena Cati Senior Vice President +1 (212)
836-9611 lcati@equityny.com
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