Acacia Research Corporation (Nasdaq: ACTG) (“Acacia” or the “Company”), known for acquiring and operating businesses in the industrial, energy, and technology sectors, announced today its acquisition of Deflecto Acquisition, Inc. (“Deflecto”) for $103.7 million. Based in Indianapolis, Indiana, Deflecto is a prominent specialty manufacturer of essential products for the commercial transportation, HVAC, and office markets. Following the acquisition, Deflecto will continue to operate under the leadership of Chief Executive Officer Ross Pliska and the existing management team.
Deflecto is a market leader in its sectors, providing regulatory-mandated products to a prestigious customer base through long-standing relationships with over 1,500 retail, wholesale, and OEM clients, as well as distribution partners worldwide. Its product offerings include emergency warning triangles and vehicle mudguards for the transportation sector, various air ducts and registers for the HVAC industry, and literature holders, sign holders, and floor mats for office use. The company manufactures its products at nine facilities located in the United States, Canada, the United Kingdom, and China.
In the twelve-month period ending August 31, 2024, Deflecto generated approximately $131 million in revenue. Acacia projects that, based on current market conditions, Deflecto will generate between $128 million and $136 million in revenue for 2024.
Martin (“MJ”) D. McNulty, Jr., Acacia’s Chief Executive Officer, stated, “We are excited to welcome Deflecto into Acacia’s expanding portfolio of strategic assets. This acquisition aligns perfectly with our growth strategy. Deflecto falls within our target size, offers a range of essential products, and is backed by an excellent management team led by Ross, who has a proven track record in operational execution and capital allocation.
“With its strong cash conversion characteristics, manageable capital requirements, and significant value creation opportunities, we are pleased to add Deflecto as a key business to our portfolio. This transaction is expected to generate immediate and substantial revenue for Acacia and be accretive to both free cash flow and earnings per share. We believe Deflecto holds considerable value creation potential in the near and long term through product and operational optimization, as well as strategic mergers and acquisitions.”
Ross Pliska, CEO of Deflecto, remarked, “The transaction with Acacia represents a perfect match and is the culmination of our efforts since 2021 to enhance Deflecto’s financial and operational performance. Acacia’s seasoned management team has a strong track record in successfully integrating acquisitions and offers industry expertise, additional capital for future investments, and immediate value creation. We look forward to collaborating with MJ and the Acacia team.”
The acquisition was financed using cash reserves and borrowings from a new senior secured credit facility, which is guaranteed by certain Deflecto subsidiaries. JPMorgan Chase is serving as the lead arranger and administrative agent for this facility, which is syndicated among other financial institutions. Following the transaction, Deflecto will have approximately $48 million in outstanding debt under the facility and $10 million in cash on hand. For further details, please refer to the Company’s 8-K filing with the U.S. Securities and Exchange Commission (SEC) today.
