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TORONTO - Apollo Technology Capital Corp. ("Apollo Capital"), a shareholder in SPAR Group, Inc. (NASDAQ: SGRP), announced today its intention to vote against Highwire Capital's proposed take-private of SPAR. Apollo Capital's Chairman and CEO, also a SPAR stockholder, raised concerns about Highwire's ability to secure financing and the potential risks to SPAR should the transaction fail.
The contested transaction involves a definitive agreement announced on September 3, 2024, for SPAR to be acquired by Highwire in an all-cash deal, relying on debt financing yet to be obtained by Highwire. Apollo Capital highlighted several issues with the proposed acquisition, including the uncertainty of Highwire's financing and the condition that SPAR's balance sheet cash be no less than $14.2 million at closing, a figure for which SPAR has not provided expected disclosures.
Apollo Capital criticized the SPAR Board of Directors for recommending the transaction without ensuring stockholders had sufficient information to make an informed decision. The company specifically pointed out that the merger agreement only requires Highwire to use "commercially reasonable efforts" to secure financing, with a mere $1.76 million penalty if those efforts fail. This arrangement, according to Apollo Capital, essentially grants Highwire a low-cost option to acquire SPAR with minimal commitment.
The concerns raised by Apollo Capital stem from a review of SEC disclosures by SPAR and Highwire, which suggest that the terms of the debt financing are not yet finalized and may differ from those initially disclosed. Furthermore, Apollo Capital believes that the lack of disclosure regarding Highwire's financial resources and the actual terms of the financing could be detrimental to SPAR's stockholders.
In light of these issues, Apollo Capital is urging the SPAR Board to provide complete and fair disclosure about Highwire's proposed financing and SPAR's closing balance sheet cash expectations. The firm contends that without this critical information, SPAR stockholders cannot have a fully informed vote on the transaction.
This report is based on a press release statement from Apollo Technology Capital Corp.
In other recent news, SPAR Group, a global merchandising and marketing services provider, has agreed to a merger with investment firm Highwire Capital. The merger, which has been unanimously approved by SPAR Group's Board of Directors, will see SPAR Group shareholders receive $2.50 in cash per share. This represents a significant premium over the company's recent share price. Post-merger, SPAR Group will become a privately-held entity and its shares will be delisted from NASDAQ.
This development is the outcome of a comprehensive review of strategic alternatives by SPAR Group's Special Committee and Board of Directors, aimed at maximizing shareholder value. The acquisition is expected to be completed in the fourth quarter of 2024, subject to approval by SPAR Group's shareholders, regulatory approvals, and other customary closing conditions. Highwire Capital has secured a debt financing commitment to fund the transaction, and Mike Matacunas will continue to lead SPAR Group post-merger.
These are the recent developments in the ongoing evolution of SPAR Group, as the company navigates its future growth initiatives.
InvestingPro Insights
As the debate over SPAR Group's (NASDAQ: SGRP) potential acquisition by Highwire Capital unfolds, recent data from InvestingPro sheds light on the company's financial position and market performance, which may be influencing stakeholder decisions.
SPAR Group's market capitalization stands at $57.91 million, reflecting its current market value amidst the acquisition discussions. The company's P/E ratio of 4.59 suggests that it may be undervalued relative to its earnings, which could be a factor in Apollo Capital's resistance to the proposed take-private deal.
InvestingPro Tips highlight that SPAR Group has been profitable over the last twelve months and operates with a moderate level of debt. These factors could be contributing to Apollo Capital's confidence in SPAR's standalone prospects. Additionally, the company's liquid assets exceed short-term obligations, which may be relevant to the $14.2 million cash balance requirement mentioned in the acquisition terms.
Notably, SPAR Group has experienced a significant price uptick over the last six months, with InvestingPro data showing a 41.04% price total return over that period. This strong performance might be influencing shareholders' valuation expectations and their willingness to accept Highwire Capital's offer.
For investors seeking a deeper understanding of SPAR Group's financial health and market position, InvestingPro offers 11 additional tips that could provide valuable context to the ongoing acquisition debate.
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