FGF and SGE Merger: Comprehensive Overview of This Strategic Business Combination

Fundamental Global Inc. (FGF) and Strong Global Entertainment (SGE) are taking significant steps toward a strategic merger aimed at improving operational efficiencies and shareholder value. This business combination reflects both companies' commitment to achieving long-term growth by integrating resources under a unified management structure. Here, we dive deeper into the transaction structure, expected benefits, and financial performance, with a FAQ section addressing shareholder queries.

Transaction Summary :

• Two companies involved, Strong Global Entertainment (SGE) and Fundamental Global (FGF)

• SGE shareholders to receive 1.5 shares of FGF for every share of SGE owned

• Shares of SGE to be delisted from trading after the close of the extended hours session on September 27, 2024

Merger Overview

Fundamental Global Inc., a Nevada-based holding company, is the parent of Strong Global Entertainment, a Canadian entity specializing in entertainment. The merger is structured as an Arrangement Agreement and Plan of Arrangement, a method chosen to combine resources while minimizing redundancies in operations and public company compliance costs. The proposed arrangement includes the following components:

1. Share Conversion Ratio: Existing shares of SGE common stock will be converted to FGF stock at a ratio of 1.5 shares of FGF common stock per share of SGE. This exchange ratio aligns with the companies' objective to consolidate value under one entity​​.

2. Formation of FG Québec: FG Québec will be formed as an unlimited liability company in British Columbia to facilitate the merger and post-merger operations. FG Québec and SGE will amalgamate into a new entity, called "Amalco," which will inherit SGE’s business functions​.

3. Escrow for Arrangement Consideration: Funds designated as the arrangement consideration will be held in escrow until transaction conditions are met. This provision aims to safeguard SGE shareholder interests until completion of the business combination​.

4. Convertible Securities Adjustment: Convertible securities, including stock options, restricted share units, and warrants, will be adjusted to be exercisable in FGF stock upon merger completion, ensuring continuity for existing stakeholders​.

Financial Context: Insights from the Latest Earnings Report

The latest earnings report provides additional context on the financial stability and growth prospects of FGF and its subsidiary SGE. Here are some key highlights:

• Revenue Streams: FGF reported strong revenue growth across its subsidiaries, driven by strategic acquisitions and organic growth in entertainment and media sectors. The earnings report indicates substantial gains in net operating income as well as improvements in cash flow, positioning FGF favorably for the merger.

• Cost Optimization: The report emphasizes FGF’s ongoing commitment to reducing operational costs through synergies between its subsidiaries. By consolidating administrative functions, the merger is expected to save millions in public company compliance and administrative costs​.

• Cash Flow and Balance Sheet: The companies maintain a healthy balance sheet, bolstered by effective cost management strategies, making this an opportune time for the merger. The expanded capital and revenue base post-merger will enable more competitive offerings and operational flexibility​.

Strategic Goals of the Merger

This merger aims to harness the core strengths of FGF and SGE to streamline operations and enhance shareholder value. The strategic goals include:

• Increased Efficiency: By unifying operations, the merger is expected to reduce duplicate functions, creating a more efficient organizational structure.

• Enhanced Market Position: The consolidation will allow the newly formed Amalco to leverage both companies' strengths, providing a more compelling offering to customers and partners.

• Focus on Shareholder Returns: Reduced costs and improved resource allocation will allow management to focus on driving stockholder value through effective growth strategies and financial stewardship.

• Public Company Cost Reductions: By eliminating the need for SGE’s independent filings and public disclosures, the combined entity can save substantially on regulatory costs and dedicate more resources to strategic initiatives​​.

  
  

Post-Merger: What’s Next for SGE?

Upon successful merger completion, SGE’s stock will be delisted from NYSE American and deregistered under the Exchange Act. This move will simplify the stock structure under FGF’s ticker symbols “FGF” and “FGFPP” on Nasdaq. Consequently, the management will gain a more concentrated focus on growth initiatives that benefit the consolidated shareholder base​.

Final Thoughts

The merger between Fundamental Global Inc. and Strong Global Entertainment is set to mark a pivotal shift in both companies’ strategic and operational landscape. With promising financial performance and shareholder value at its core, the business combination aligns with both companies' goals of delivering a more efficient and competitive entity. By consolidating into one streamlined structure, FGF and SGE aim to unlock new growth potential, optimize operational costs, and drive long-term shareholder value.

FAQs on the FGF and SGE Merger

Why are FGF and SGE merging?

FGF and SGE aim to create a streamlined operational structure that reduces redundancies, enhances shareholder value, and provides a strong financial foundation for growth.

How will the share conversion ratio work?

SGE shareholders will receive 1.5 shares of FGF common stock for each share of SGE common stock they hold at the merger's effective time.

What approvals are needed for this merger?

The merger requires approval from both companies' shareholders and the Supreme Court of British Columbia. An SGE shareholder meeting on September 17, 2024, will also involve a vote on merger-specific proposals​.

Will SGE’s stock still trade on the NYSE American after the merger?

No, SGE stock will be delisted from NYSE American upon completion of the merger and will no longer be publicly traded independently.

What financial benefits can shareholders expect?

Shareholders can anticipate cost savings from reduced public company expenses and enhanced value from streamlined management focus, increased revenue potential, and operational efficiencies.

What will happen to SGE's convertible securities?

Upon completion, all SGE convertible securities will adjust to become exercisable in FGF common stock, preserving shareholder rights and ensuring continuity.

FGF Merger

FGF Merger