Star Equity Holdings Announces Acquisition of Timber Technologies

Enters Engineered Wood Products Market

Substantially Improves Cash Flow

Star Equity Holdings, Inc. (“Star” or the “Company”), a diversified holding company, announced it has completed the acquisition of Timber Technologies, LLC (“Timber Tech”), a Wisconsin-based engineered wood products manufacturer, effective May 17, 2024.

Transaction Highlights

• $23 million cash-free, debt-free purchase price.
• $23 million includes: $16 million in upfront cash; $4 million in deferred cash; and a $3 million, 2-year earn-out payable 50% in cash and 50% in shares of STRRP preferred stock.
• Earn-out Adj. EBITDA targets are $5.4 million and $6.0 million for years 1 and 2, respectively.
• Associated real estate will be acquired in June 2024 for $3 million in a separate transaction.
• Closed $7 million term loan from Bridgewater Bank to partially finance the acquisition.
• Co-Owners/Operators, Tom Niska and Dale Schiferl, will stay with the business in their current roles.

Founded in 2003, Timber Tech manufactures glue-laminated timber products (“glulam”) for various end markets and applications, including agriculture, industrial, infrastructure, and building construction (commercial and residential). Its glulam products have superior strength, durability, and environmental sustainability compared to solid timber and other building materials. Operating in a niche industry and benefiting from secular tailwinds, Timber Tech’s glulam products have been taking market share from less sustainable building materials such as steel, concrete, and aluminum.

Rick Coleman, CEO of Star, commented, “The acquisition of Timber Tech marks a significant step forward in Star’s expansion strategy – it diversifies Star’s Building Solutions division end markets beyond multi-family and residential construction, and its strategic location allows for collaboration with Star’s existing Minneapolis metro area businesses, EdgeBuilder and Glenbrook. Financially, Timber Tech brings a 20-year history of consistent profitability and strong cash generation, which we anticipate will greatly improve Star’s overall profitability. Of note, for full year 2023, Timber Tech had revenue of $18.8 million¹ and Adjusted EBITDA of $5.5 million.”

“Timber Tech’s strong market footprint in the Midwest and Northwest, the high demand for its superior product in a niche market, and the wide range of end markets served provide an excellent addition to Star’s Building Solutions division. We are excited about the growth opportunities of this business inside our holding company structure and the value we can create for our shareholders going forward,” added Mr. Coleman.

Tom Niska & Dale Schiferl, Co-Owners of Timber Tech, commented, “We are thrilled to partner with Star to lead Timber Tech into its next phase of growth. The Star team’s extensive experience in overseeing businesses in the construction space makes them a great fit for our business, and we’re excited to see what we can do together. Timber Tech has taken great strides to expand our business over the years with increased manufacturing capacity, personnel, and equipment to best position ourselves for continued success.”

Jeff Eberwein, Executive Chairman of Star, concluded, “One year ago we completed the sale of Digirad Health for $40 million, and, with this $23 million acquisition, we have effectively replaced Digirad with a more complementary business of similar EBITDA but with stronger growth, margins, and free cash flow.”

Timber Tech will continue its operations as part of Star’s Building Solutions division, which operates alongside Star’s Investments division. As a diversified holding company, both of Star’s divisions will continue to pursue growth opportunities through both organic growth and acquisitions.

Additional Transaction Details

• Timber Tech operates a 69,000 square foot facility in Colfax, WI. Star will also acquire this associated real estate in a separate transaction expected to close in June 2024. Star expects to issue a $3 million seller note to finance the purchase of the real estate. The seller note will bear a fixed interest rate of 7.5% and amortize over ten years.
• Simultaneous with the closing of the Timber Tech acquisition, Star also closed a $7 million term loan with Bridgewater Bank to partially finance the acquisition. This acquisition term loan bears a fixed interest rate of 7.85% and amortizes over five years.
• Star issued a total of 90,000 RSUs from its 2022 Inducement Stock Incentive Plan to three Timber Tech employees at the closing of the acquisition.
• The Peakstone Group served as exclusive M&A advisor to Timber Technologies in connection with the transaction.

About Timber Technologies

Located in Colfax, Wisconsin, Timber Technologies LLC started operations in 2003 and has been manufacturing glue-laminated (glulam) wood columns and beams for post frame builders since that time. Timber Technologies products include treated and untreated columns for sidewalls and end walls in post frame buildings, glue-laminated headers and beams, and architectural grade beams for high-end commercial structures.

For more information, visit www.timber-technologies.com.

About Star Equity Holdings, Inc.

Star Equity Holdings, Inc. is a diversified holding company currently composed of two divisions: Building Solutions and Investments.

Source: Star Equity Holdings