Star Equity (STRR) M&A Announcement summary

Deal rationale and strategic fit

• The merger creates a larger, diversified multi-sector holding company with pro-forma annualized revenues of $210 million, enhancing scale, revenue diversification, and aiming for inclusion in the Russell 2000 index.

• The combined entity will adopt a decentralized operating model and value-oriented acquisition strategy, leveraging both companies' strengths and enabling focused M&A and capital allocation.

• The merger enables better utilization of $240 million in US Federal NOLs, strengthens the balance sheet, and allows for future expansion into new business segments.

• Board and management will own approximately 24% of NewCo's pro-forma shares, aligning interests with shareholders.

• NewCo will have four reporting segments: Building Solutions, Business Services, Energy Services, and Investments, with no impact on clients, employees, or brand names.

Financial terms and conditions

• The transaction is a stock-for-stock merger: Hudson will issue 0.23 shares of HSON common stock for each STRR common share, and preferred stock will be exchanged one-for-one with identical terms.

• Upon completion, Hudson shareholders will own approximately 79% and Star shareholders 21% of NewCo's estimated 3.49 million shares.

• The exchange ratio aligns with the 20-day VWAP trading ratio.

• Merger terms were approved by both companies' boards and special committees; closing is expected in the second half of 2025, pending approvals.

• No impact is expected on Hudson's NOL protection provisions.

Synergies and expected cost savings

• At least $2 million in annualized cost savings are projected within 12 months post-merger, mainly from eliminating duplicative public company costs and consolidating back-office functions.

• These savings are projected to add approximately $0.57 in incremental pro-forma EPS.

• Margin expansion is anticipated, with pro-forma adjusted EBITDA margin rising from 3% in 2024 to over 10% by 2030.

• NewCo targets $40 million in adjusted EBITDA by 2030, up from $6.4 million in 2024 (pro forma), based on organic growth and bolt-on acquisitions.

• Enhanced ability to utilize significant NOLs, improving tax efficiency.