UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 30, 2021
STAGWELL INC.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 001-13718 | 86-1390679 | ||
|
(State or Other Jurisdiction
of Incorporation) |
(Commission
File Number) |
(I.R.S. Employer
Identification No.) |
One World Trade Center, Floor 65, New York, NY 10007
(Address of principal executive offices and zip code)
(646) 429-1800
(Registrant’s Telephone Number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Class A Common Stock, $0.001 par value | STGW | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 3.02 | Unregistered Sales of Equity Securities. |
On December 30, 2021, Stagwell Inc. (the “Company’) entered into an agreement (the “Agreement”) to purchase the remaining 49% interest in Instrument LLC not previously owned by the Company from Instrument Holdings Inc. (“Instrument Holdings”) and Instrument Leadership LLC (“Instrument Leadership” and, together with Instrument Holdings, the “Sellers”) for an aggregate purchase price of $160 million. The Agreement replaces the previous agreement between the Company and the Sellers, which obligated the Company to an uncapped future earn out payment that management believes would have exceeded the $160 million purchase price. The purchase price is comprised of $86,078,627 in cash and $73,921,373 in Class A common stock of the Company (“Stagwell Stock”) and payable in three installments. At closing of the transaction on December 31, 2021, the Company paid the first installment of $75 million, comprised of $37.5 million in cash and $37.5 million, or 4,475,653 shares, in Stagwell Stock. The number of shares was calculated based on the average closing price of the Stagwell Stock for the 30 trading days immediately prior to the date of the Agreement. The second and third installments of $42.5 million, each comprised of $24,289,313.50 in cash and $18,210,686.50 in Stagwell Stock, are payable on April 3, 2023 and April 1, 2024, respectively. The number of shares issued in each installment will be calculated based on the average closing price of the Stagwell Stock for the 30 trading days immediately prior to the payment date. Under the terms of the Agreement, the aggregate number of shares of Stagwell Stock issued in the transaction may not exceed 10% of the Company’s outstanding Class A common stock.
The issuance of Stagwell Stock to the Sellers is exempt from registration under Section 4(a)(2) of the Securities Act, as amended. The Company will receive no cash proceeds and no commissions will be paid to any person in connection with the issuance.
| Item 7.01 | Regulation FD Disclosure. |
On January 6, 2022, the Company issued a press release announcing its acquisition of the remaining 49% interest in Instrument LLC. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The foregoing information (including Exhibit 99.1 hereto) is being furnished under Item 7.01. Such information (including Exhibit 99.1 hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| 99.1 | Press release dated January 6, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: January 6, 2022
| STAGWELL INC. | ||
| By: | /s/ Frank Lanuto | |
| Frank Lanuto | ||
| Chief Financial Officer | ||
Exhibit 99.1
Stagwell (STGW) completes acquisition of Instrument, fast-growing digital transformation company
Fully aligns leadership team with Stagwell’s digital growth strategy and supports future of agency as part of the network
New York, New York. January 6, 2022 – Stagwell Inc. (NASDAQ: STGW) announced today it has acquired the remaining 49% of Instrument, a leading digital brand and experience innovation company. Founded in Portland, Oregon, Instrument is one of Stagwell’s fastest growing agencies and employs over 400 people working on clients including Nike, Google, Salesforce and Epic Games. Stagwell’s predecessor company, MDC Partners, had acquired 51% of Instrument in 2018.
“Instrument is all in with Stagwell,” said Stagwell Chairman and CEO Mark Penn. “Instrument is a first-rate digital company, having grown over 30% annually in each of the past two years. The entire leadership team has done an excellent job of growing their business while developing a culture of innovation, inclusion and outstanding client service. We are pleased to welcome Instrument into the network fully and to have Justin, JD and their team onboard for the next phase of the company’s growth and development.”
“We believe in Instrument’s future with Stagwell and are pleased to take the final step into the network,” said Instrument CEO Justin Lewis. “We are looking forward to being a full part of Stagwell and the Constellation and to the growth and development opportunities this investment will provide for our team.”
Stagwell’s additional investment in Instrument fully aligns Stagwell with one of its fastest-growing businesses, provides for easier-to-scale digital operations and creates greater certainty for investors through full-ownership. The deal includes a fixed payment amount spread across a three-year term, split between cash and stock in STGW. This mutually beneficial structure provides Instrument’s management with appropriate incentives for their efforts and creates significant shareholder value.
The completion of the current transaction brings to a close the uncertainty associated with uncapped earn-outs for all prior investments and greatly improves management of leverage and investment returns. With this deal, all previous uncapped earn-out deals have now been restructured. Stronger than expected free cash flow from Stagwell’s consolidated operations combined with the cash/equity payment structure enabled Stagwell to move forward with the completion of this acquisition at this time while further deleveraging the company’s balance sheet.
“We have moved to expand our portfolio of high growth digital assets, increase free cash flows, effectively manage leverage and end uncapped earn-out structures,” said Stagwell Chief Financial Officer Frank Lanuto.
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About Stagwell Inc.
Stagwell is the challenger network built to transform marketing. We deliver scaled creative performance for the world’s most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, our 10,000+ specialists in 20+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients. Join us at www.stagwellglobal.com.
Contact: Beth Sidhu
beth.sidhu@stagwellglobal.com
202-423-4414