NEW YORK - Acacia Research Corporation (NASDAQ:ACTG), a company specializing in the acquisition and operation of businesses in the industrial, energy, and technology sectors, has announced the acquisition of Deflecto Acquisition, Inc. ("Deflecto") for $103.7 million. Deflecto, a specialty manufacturer based in Indianapolis, Indiana, produces essential products for the commercial transportation, HVAC, and office markets.
The acquisition is expected to significantly boost Acacia's revenue and be immediately accretive to its free cash flow and earnings per share. Deflecto is anticipated to generate between $128 million and $136 million in revenue for the year 2024, building on a trailing twelve-month revenue stream of approximately $131 million as of August 31, 2024.
Deflecto, which has been a market leader in its segments, boasts a customer base that includes over 1,500 retail, wholesale, and OEM clients globally. The company's product line includes emergency warning triangles, vehicle mudguards, air ducts, air registers, and various office products. Manufacturing operations are spread across nine facilities in the United States, Canada, the United Kingdom, and China.
Acacia CEO Martin D. McNulty Jr. expressed optimism about the acquisition, highlighting Deflecto's diversified goods, strong management team, and attractive cash conversion characteristics. He also noted the potential for further value creation through product and operational optimization.
Ross Pliska, CEO of Deflecto, echoed these sentiments, emphasizing the strategic fit and the opportunity for immediate value creation under Acacia's management and additional capital.
The transaction was financed through cash on hand and borrowings under a new senior secured credit facility guaranteed by certain subsidiaries of Deflecto. JPMorgan Chase (NYSE:JPM) led the arrangement of the facility, which is syndicated among other financial institutions. Post-transaction, Deflecto is expected to have $48 million outstanding under the facility and $10 million of cash on hand.
Legal and financial advisement for the acquisition was provided by Baker Botts and Deloitte for Acacia, and Vedder Price and TD Cowen for Deflecto.
This news is based on a press release statement.
In other recent news, Acacia Research Corporation has reported a significant surge in its Q2 revenue, marking a 227% increase to $25.8 million compared to the same period in the previous year. This substantial rise is primarily attributed to the acquisition of operated producing wells in the Western Anadarko Basin and an uptick in licensing revenue in the intellectual property business. Despite a slight dip in industrial operations revenue due to lower printer sales, the energy operations of the company contributed a notable $14.2 million to the total revenue.
Acacia's long-term approach and disciplined focus are anticipated to cushion the company against market volatility. The company has also expressed its ongoing commitment to pursuing mergers and acquisitions, particularly in the technology, energy, and industrial sectors. These recent developments underscore Acacia's strategic efforts to bolster its diverse operations and increase profitability.
While the company reported an operating loss of $4.8 million for the quarter, it was a reduction of 62% from previous figures. Analysts from various firms have noted the company's robust operating cash flow for the first half of 2024, primarily from patent settlements, and the potential opportunity for investors as the company is trading below book value. These insights provide a glimpse into Acacia's financial health and its strategic direction moving forward.
InvestingPro Insights
Acacia Research Corporation's acquisition of Deflecto aligns well with its current financial position and growth trajectory. According to InvestingPro data, Acacia's revenue growth has been impressive, with a 195.04% increase in the last twelve months as of Q2 2024. This acquisition is likely to further boost this growth, given Deflecto's projected revenue of $128-136 million for 2024.
The company's strong financial performance is reflected in its profitability metrics. InvestingPro data shows that Acacia has been profitable over the last twelve months, with a P/E ratio of 7.74, suggesting the stock may be undervalued relative to its earnings. Additionally, the company's liquid assets exceed short-term obligations, indicating a solid financial foundation to support this acquisition.
However, investors should note two key InvestingPro Tips. First, Acacia is quickly burning through cash, which could be a concern given the $103.7 million acquisition cost. Second, net income is expected to drop this year, which may explain why analysts do not anticipate the company will be profitable this year despite its recent performance.
For a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable for investors considering Acacia's stock in light of this acquisition.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.