Steel Connect, Inc. (NASDAQ:STCN), a business services company valued at $77.27 million, has announced the approval of a $6 million settlement by the Delaware Court of Chancery to resolve a class and derivative action filed against the company and certain affiliates.
The company, which InvestingPro analysis shows has maintained strong financial health with more cash than debt on its balance sheet, continues to trade below its Fair Value, according to InvestingPro's proprietary models.
The litigation, known as Reith v. Lichtenstein, et al., was settled with an agreement that requires the defendants' insurance carriers to pay the sum to Steel Connect within twenty days post the effective date of the settlement, which was approved on Sunday.
The court also sanctioned an award of $1,154,390.76 in legal fees and expenses to the plaintiff's counsel and an additional mootness fee of $463,040.00. Following a thirty-day appeal period without any challenges, the settlement will become effective. With a robust current ratio of 4.27x, InvestingPro data indicates the company is well-positioned to handle these financial obligations while maintaining strong liquidity.
The company's common stockholders, excluding certain shares held by Steel Partners Holdings LP and others as of May 1, 2023, and shares held by current directors and officers of the company, are expected to receive approximately $1.15 per share from the net litigation proceeds.
Furthermore, Steel Connect's Audit Committee has approved a potential short-form merger with an indirect subsidiary of Steel Partners, contingent on the distribution of the litigation proceeds to common stockholders. If the merger proceeds and the funds are not yet distributed, each share of common stock will be entitled to one contingent value right to receive a portion of the proceeds under a Contingent Value Rights Agreement.
Additionally, the court approved amendments to the Stockholders' Agreement and corporate governance enhancements, including a review process for compensation clawbacks and equity award grants. These governance policies will take effect upon the completion of the proposed short-form merger, after which the Stockholders' Agreement will terminate. The company's stock has shown strong momentum, with a year-to-date return of 28.49%. Discover more insights and 8 additional ProTips about Steel Connect with an InvestingPro subscription.
This news is based on a press release statement and contains forward-looking statements subject to risks, such as potential appeals or actions that could delay the payment of the litigation proceeds or affect the proposed merger.
In other recent news, Steel Connect, a global provider of supply chain management services, has announced a definitive agreement for a cash merger with Steel Partners Holdings. In this transaction, Steel Connect will become a wholly owned subsidiary of Steel Partners. Shareholders of Steel Connect will receive $11.45 in cash per share at the effective time of the merger.
This arrangement aligns with the Delaware General Corporation Law's Section 253, permitting a merger without the approval of the board or other shareholders, as Steel Partners already owns over 90% of Steel Connect on an as-converted basis.
In other recent developments, Steel Connect has reached a settlement agreement in a class and derivative action lawsuit titled Reith v. Lichtenstein, et al. The settlement includes a $6 million payment by the defendants' insurers to Steel Connect, which will be distributed to common stockholders after deducting court-approved legal fees and expenses. The settlement also mandates the adoption of certain corporate governance enhancements.
These recent events underscore Steel Connect's active management and strategic decisions. The merger with Steel Partners Holdings and the settlement of the class action lawsuit are significant milestones for the company. As these developments unfold, it will be crucial for investors to monitor the company's progress.
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