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Steel Holdings to acquire 7.5 million ModusLink shares at USD4 per share

ModusLink Global Solutions has entered into an investment agreement with Steel Partners Holdings, which together with certain affiliates, including Handy & Harman, beneficially owns 14.9 per cent of ModusLink’s outstanding shares.

Under the terms of the agreement, Steel Holdings would purchase 7.5 million newly issued shares of common stock at a price of USD4.00 per share, representing a cash investment in the company, before fees and expenses, of USD30m.

The USD4.00 purchase price per share represents a 45 percent premium to the closing market price for ModusLink common stock on 8 February 2013.

In addition, at the closing of the transaction the company would issue Steel Holdings warrants to acquire 2.0 million shares at an exercise price of USD5.00 per share. In addition, the Steel Group may purchase up to approximately 1.4 million shares of ModusLink’s outstanding common stock, subject to proportionate adjustment. If all stock is purchased and all warrants are exercised as permitted under the agreement, the Steel Group would own approximately 32.6 per cent of ModusLink’s outstanding shares.

The investment is subject to certain enumerated closing conditions, including shareholder approval of the investment and the election of two Steel Group designees to the ModusLink board of directors at the company’s 2012 annual meeting of stockholders.

In connection with the investment agreement, ModusLink has reached a settlement agreement with Handy & Harman in relation to the annual meeting. Under the terms of the settlement agreement, ModusLink has agreed to nominate and solicit proxies solely for the Steel Group representatives Warren G. Lichtenstein and Glen M Kassan for election at the meeting as Class I directors. Lichtenstein is chairman of the board of directors of Handy & Harman and chairman of the board and chief executive officer of the general partner of Steel Holdings. Kassan is vice chairman of the board of directors of Handy & Harman and managing director at Steel Partners LLC. Handy & Harman has agreed to withdraw its preliminary proxy statement and to end its proxy solicitation, and has entered into certain other standstill arrangements with the company.

Upon consummation of the investment, ModusLink directors Edward E. Lucente and Joseph M. O’Donnell would step down from the board, and current chairman Francis J. Jules and director and audit committee chairman Michael J Mardy, whose terms on the board conclude at the annual meeting, would each be reappointed to the board as Class II directors. In addition, at that time, Lichtenstein would be designated chairman of the board of the company. The size of the board would be fixed at seven directors immediately following the annual meeting.

“The commitment of new capital from Steel Holdings at a significant premium to the recent price of ModusLink shares is a strong vote of confidence in ModusLink’s future by our largest stockholder,” says Jules. “The investment also validates the recent strategic changes and improvements the company has undertaken, and further strengthens the company’s balance sheet. We are also pleased to reach an agreement where the company will be nominating Warren Lichtenstein and Glen Kassan, two highly qualified nominees, for election to ModusLink’s board of directors at our upcoming annual meeting. The board looks forward to the opportunity to work with Warren and Glen to increase stockholder value.”

“We have worked constructively with ModusLink to reach these agreements and are excited by the opportunity to invest further in the company’s future and to contribute significantly to the creation of value for all ModusLink stockholders,” says Lichtenstein. “I believe ModusLink has considerable potential for value creation as evidenced by Steel Holdings’ investment. I also believe that Glen and I are well suited to help the company towards that objective and we look forward to working with the rest of the board and ModusLink management to that end.”

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