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Executive Summary

Distribution Solutions Group (DSGR) filed a preliminary proxy statement (PREM14A) for a special meeting to approve a going-private merger. Under the agreement, each outstanding share of DSGR common stock (excluding shares held by affiliates and dissenting shares) will be converted into the right to receive $35.00 per share in cash. The transaction is a controlling-stockholder buyout led by LKCM Headwater and CEO J. Bryan King, who collectively own 78.6% of the company. The Special Committee and Board (excluding conflicted directors) unanimously recommend approval, and the deal is supported by a fairness opinion from William Blair. The merger is expected to close in Q4 2026, subject to shareholder and disinterested stockholder approval, with no financing contingency.

Key Financial Metrics

Key Facts

• Merger consideration of $35.00 per share in cash, representing an ~81% premium to the $19.31 closing price on March 13, 2026 (the last trading day before the initial proposal).
• The transaction is a going-private merger with a controlling stockholder (LKCM Headwater and affiliates, including CEO J. Bryan King, who own ~78.6% of DSGR).
• A Special Committee of independent and disinterested directors unanimously approved the deal, supported by a fairness opinion from William Blair.
• The merger requires approval from both a majority of outstanding shares and a majority of votes cast by disinterested stockholders (excluding the controlling group).
• The HSR Act waiting period was terminated on August 20, 2026, clearing the primary antitrust hurdle.
• The merger agreement includes a $22.2 million reverse termination fee payable by Parent if it fails to close under certain conditions, and a $9.3 million termination fee payable by the Company if it accepts a superior proposal.
• The deal is not contingent on financing; it is backed by an equity commitment letter and an amendment to the company's existing credit facility.
• The company's unaudited projections show revenue growing from ~$2.15B in 2026 to ~$2.75B in 2030, with Adjusted EBITDA expanding from ~$203M to ~$352M.

Financial Impact

All-cash consideration of $35.00 per share values the minority stake at approximately $370.7 million based on 11.1 million non-affiliate shares. The total enterprise value implied by the deal is approximately $2.33 billion, including net debt of $685 million.

Risk Factors

• Risk that the merger fails to receive the required disinterested stockholder approval, though the controlling group's 78.6% stake makes this unlikely.
• Potential for appraisal litigation from dissenting shareholders seeking a higher fair value in Delaware court.
• Risk of a competing superior proposal triggering the termination fee, though the controlling stockholder's position makes a third-party deal difficult.
• Execution risk related to the debt financing and the company's ongoing operations during the pendency of the merger.

Market Snapshot

Investment Themes

Documents Analyzed

This report is based on 5 SEC documents filed with EDGAR.

US Market Status