By Ed Avis
K. Suriyakumar, ARC Chairman & CEO
ARC is one big step closer to going private: Its board of directors announced on August 28 that they have approved a deal with a group of investors -- including five key leaders of the company -- to take it private. ARC, which rolled up dozens of leading reprographic firms in the 1990s, has been a public company since 2005.
According to a press release posted on ARC's site, the group of investors will pay $3.40 per share for the shares it doesn't already own. That's 15 cents more per share than the group offered when it initially offered to buy the company in April. On August 29, the price of ARC on the New York Stock Exchange was $3.34, and the stock has ranged from $2.56 to $3.52 in the past year. There are 43.25 million outstanding shares, so the acquisition group's offer values the company at about $147 million.
The acquisition group consists of CEO Kumarakulasingam "Suri" Suriyakumar, COO Dilantha Wijesuriya, CFO Jorge Avalos, CTO Rahul Roy, a private investor named Sujeewa Sean Pathiratne, and others.
"Following Mr. Suriyakumar's indication of interest to buy the Company in April of this year, the Special Committee, with the assistance of external financial and legal advisors it retained, undertook a thorough review of the Company's financial and strategic alternatives, including soliciting other potential acquirors and remaining a publicly held company," said Bradford Brooks, lead independent director and a member of the Special Committee, in the press release posted on ARC's site. "Informed by its review and process, the Special Committee firmly believes this transaction to be in the best interest of all stockholders not affiliated with Mr. Suriyakumar, providing them with a compelling outcome in terms of maximizing value while offering immediate liquidity at a strong premium."
However, not everyone is thrilled with the acquisition group's offer. Law firm Ademi LLP issued a press release the same day as the offer was made that they have doubts that the offer is the best possible.
"Ademi LLP is investigating ARC Document Solutions (NYSE: ARC) for possible breaches of fiduciary duty and other violations of law in its transaction with the acquisition group led by Kumarakulasingam Suriyakumar, ARC Document Solutions' Chairman and CEO, and several other members of the executive team of ARC Document Solutions," the press release stated. "The transaction agreement unreasonably limits competing transactions for ARC Document Solutions by imposing a significant penalty if ARC Document Solutions accepts a competing bid. ARC Document Solutions insiders will receive substantial benefits as part of change of control arrangements."
The next step for the transaction is for shareholders to vote on the offer in a meeting called specifically for that purpose. That meeting date has not been announced, though the press release stated that the transaction is expected to close before the end of 2024.