The deal also provides each share a right to receive half a share of Star’s 10% Series A Cumulative Perpetual Preferred Stock, with any fractional preferred share paid in cash at $10.00 per share.

Star Equity Holdings will give Harte Hanks shareholders cash of $5.00 per share, with the option to receive preferred stock instead, subject to a $19.2 million cash cap. This structure lets investors tailor payout while limiting cash outlay, preserving Capital for post‑merger integration.

Key Highlights

  • Cash consideration is set at $5.00 per share, with total cash payments limited to $19,200,000.
  • Shareholders may elect to receive 0.50 shares of Star’s 10% Series A Cumulative Perpetual Preferred Stock per common share.
  • Fractional Preferred Shares are compensated with cash equal to $10.00 for each fractional share.

Star Equity Holdings is offering Harte Hanks shareholders a cash payout of $5.00 per share, while also granting the right to receive preferred stock under the Merger agreement. The cash component cannot exceed $19,200,000, establishing a hard cap on out‑of‑pocket expense for the transaction. By fixing the per‑share cash amount and limiting total cash, the company balances immediate Liquidity with long‑term equity considerations, giving investors a clear choice between cash and equity.

This dual‑track structure allows shareholders to align the receipt of value with their individual financial objectives, whether they prefer the certainty of cash today or the potential upside of preferred shares that carry a Dividend feature. Because the cash outlay is capped, the merger’s exposure to Cash Flow risk is contained, while the preferred‑stock option preserves upside participation without increasing immediate expense. The arrangement thus directs how capital will be deployed after closing, directing a portion of the financing into a perpetual dividend‑paying security and leaving the remainder to support operational integration.

Consequently, the design of the payout mechanism directly shapes the overall financial profile of the combined entity.

Merger Cash and Preferred Structure

The merger framework stipulates that each Harte Hanks share may be treated as a “Cash Electing Share” receiving $5.00 in cash, or as a “Preferred Stock Electing Share” qualifying for 0.50 shares of Star’s 10% Series A Cumulative Perpetual Preferred Stock. The aggregate cash paid to all Cash Electing Shares is bound by the $19,200,000 ceiling, ensuring the company does not exceed that limit regardless of the number of electing shareholders. Preferred Stock Electing Shares bypass the cash cap, receiving the designated portion of preferred equity.

This split offers a blend of immediate liquidity and future dividend potential, allowing investors to align their payout with personal financial goals. The mechanism also safeguards the company’s Balance Sheet by restraining cash outflows while still delivering value through preferred equity. Hence, the choice between cash and preferred stock directly influences the composition of post‑merger capital.

Election Mechanics and Fractional Shares

Shareholders must indicate their election, cash, preferred stock, or a hybrid, before the merger closing, with each election processed according to the agreement’s formulas. For any Fractional Share of the preferred stock that would otherwise be issued, the holder receives cash calculated at $10.00 per fractional share, eliminating fractional equity issuance and simplifying the distribution. Vested company Options and restricted stock units are automatically treated as the shareholder’s elected type, converting any excess of the merger consideration over the option’s exercise price into the appropriate cash or preferred stock amount.

This conversion ensures that all outstanding equity awards are settled in line with the shareholder’s election, preventing residual obligations after the merger. By converting all equity awards into cash or preferred stock, the company avoids lingering liabilities and streamlines the transition of ownership. Consequently, the election process directly determines the final cash outlay and preferred stock issuance.

Impact on Capital Structure and Shareholder Rights

All Harte Hanks treasury shares held by the company, Star, or Merger Sub are slated for cancellation, removing them from the capital structure without any consideration. Remaining outstanding shares convert into the merger consideration based on each shareholder’s election, with cash‑electing shares receiving the $5.00 cash amount and preferred‑stock‑electing shares gaining 0.50 preferred shares per common share. No new common stock is issued, preserving the existing equity hierarchy and preventing dilution of existing shareholders.

The preferred stock issued carries a 10% cumulative dividend and is perpetual, providing ongoing income without a Maturity date. By limiting cash payments and allocating preferred equity, the merger reshapes the combined entity’s balance sheet, enhancing Leverage metrics while delivering a dividend‑yielding instrument to shareholders. This restructuring influences future financing flexibility and the Cost of Capital for the merged organization.

Next Steps and Stockholder Meeting

The merger remains contingent on an affirmative vote by Harte Hanks shareholders at a special meeting scheduled for later this year. Approval of the proposal will trigger a closing timeline that targets the end of the calendar year, at which point Harte Hanks will be absorbed into Star’s Business Services division. That integration step is predicated on the successful completion of the vote, because only a majority endorsement activates the contractual mechanisms that convert each share into either cash or preferred stock.

The outcome of the meeting therefore determines the exact mix of the $5.00 cash component and the 0.50 preferred‑share entitlement, cementing the final composition of post‑merger capital. Investors should monitor the voting process closely, as the decision will lock in the hard cash cap and the issuance of 10% cumulative perpetual preferred shares. Once the election is confirmed, the company can finalize the allocation of cash up to the $19,200,000 ceiling while issuing the corresponding preferred securities without further negotiation.

In effect, the special meeting serves as the gatekeeper that translates shareholder preference into the definitive financial terms governing the combined organization.