Landon Capital

Acacia Research (NASDAQ: ACTG) Acquires Deflecto

Acacia Research Corporation (NASDAQ: ACTG) (Nasdaq: ACTG) (“Acacia” or the “Company”), which acquires and operates businesses across the industrial, energy and technology sectors, announced today that is has acquired Deflecto Acquisition, Inc. (“Deflecto”) for $103.7 million (the “Transaction”). Headquartered in Indianapolis, Indiana, Deflecto is a leading specialty manufacturer of essential products serving the commercial transportation, HVAC and office markets. Under Acacia’s ownership, Deflecto will continue to be led by Ross Pliska, Chief Executive Officer, and the existing Deflecto management team.

Deflecto is a market leader across each of its segments and end markets, supplying essential, regulatory mandated products to a blue-chip customer base via long-term relationships with more than 1,500 leading retail, wholesale and OEM customers and distribution partners globally. Its products include emergency warning triangles and vehicle mudguards used by the transportation industry, various airducts and air registers used by the HVAC market and literature, sign holders and floormats used by the office market. Deflecto manufactures its products at nine manufacturing facilities across the United States, Canada, the United Kingdom and China.

In the trailing twelve-month period ended August 31, 2024, Deflecto generated revenue of approximately $131 million. Based on current market conditions and trends, Acacia expects Deflecto to generate approximately $128-$136 million in revenue in 2024.

Martin (“MJ”) D. McNulty, Jr., Acacia’s Chief Executive Officer, commented:

“We are pleased to add Deflecto to Acacia’s growing portfolio of strategic assets. This acquisition is consistent with the types of opportunities we look for. Deflecto fits in our target size range, sells diversified and necessary goods and has an excellent management team, led by Ross, with a demonstrated track record of operational execution and capital allocation.

With attractive cash conversion characteristics, modest capital requirements and attractive value creation opportunities we are pleased to add Deflecto as a key business to our growing portfolio. The transaction is expected to deliver immediate and significant revenue to Acacia and be accretive to free cash flow and earnings per share. We believe Deflecto presents attractive near and long-term term value creation opportunities through product and operational optimization, as well as strategic M&A.”

Ross Pliska, Deflecto’s Chief Executive Officer, commented:

“The transaction with Acacia is a seamless fit and the culmination of Deflecto’s efforts since 2021 to significantly improve Deflecto’s financial and operational performance across the business. Acacia’s experienced management team has a history of successfully integrating acquisitions and offers industry expertise, additional capital for future investments and immediate value creation. We can’t wait to start working with MJ and the rest of the Acacia team.”

The Transaction was funded utilizing cash on hand and borrowings under a new senior secured credit facility (the “Facility”) guaranteed by certain subsidiaries of Deflecto. JPMorgan Chase is acting as the lead arranger and administrative agent under the Facility, and the Facility is syndicated among other financial institutions. Following distribution of the Transaction proceeds, Deflecto will have approximately $48 million outstanding under the Facility and $10 million of cash on hand. For more information, see the Company’s 8-K filed today with the U.S. Securities and Exchange Commission (the “SEC”).

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