Stagwell Media LP Makes Firm, Improved Offer For Combining Its Growing Digital Businesses With MDC Partners (MDCA), After Feedback From Shareholders

Issues Presentation Outlining the Merits of the Proposed Transaction and Demonstrates the Fairness of the Equity Split to MDC and Stagwell Shareholders

Stagwell Media LP (“Stagwell”) announced that it has provided the Special Committee of MDC Partners, Inc. (“MDC”) (Nasdaq: MDCA) with an improved final offer (the “Revised Offer”) to combine the high growth, digital businesses of Stagwell with MDC Partners. The Revised Offer provides that Stagwell would receive 185 million shares of MDC at the closing of the transaction, which is a reduction of 31 million shares from the original transaction that was recommended by the Special Committee and announced on December 21, 2020 (the “Approved Transaction”).

“The combination of Stagwell and MDC provides both sets of shareholders with enhanced opportunities for value creation,” said Mark Penn, Managing Partner of The Stagwell Group. “The new company will be positioned well to grow and compete, with more scale, less leverage and a strong position anticipated in the fastest growing, digital sectors of the marketing and advertising industry.”

After suggesting a potential revised offer on June 6, we went through a process of consulting with major shareholders and believe, based on those discussions, we are now in alignment with major holders; this should enable the Special Committee expeditiously to assess and approve the Revised Offer, amend the Approved Transaction and reschedule the MDC shareholder meeting for July.

“This is the moment,” Mr. Penn said, “to give nearly 10,000 employees the certainty of a vote and a final deal so their careers can move forward.”

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Stagwell released a presentation to MDC shareholders, which is available here, describing the merits of the combination and the fairness of the transaction to MDC shareholders. A video on the combination can be found here:

Since Stagwell first announced its proposed combination with MDC approximately one year ago, MDC’s stock has risen from $1.15 per share to $5.58 per share at the close on Friday, far outpacing the market and MDC’s peers, indicating a strong reception for the combination.

At the current stock price, the transaction values MDC at 8.1x 2021 estimated Adjusted EBITDA, a premium to the multiple of peer companies when taking into account MDC’s higher leverage, greater revenue declines, lower digital services mix, smaller scale, limited liquidity and troubled history.

Stagwell has grown substantially on the top and bottom lines quarter-to-date over the same period in 2020.

“The pandemic, we believe, has only strengthened the relative valuations in Stagwell’s favor by causing a significant long-term acceleration of ecommerce — a prime driver of digital marketing services – and a corresponding long-term decrease in conventional advertising,” Mr. Penn added. “In recognition of this trend, companies closely resembling Stagwell are valued at significantly higher, double-digit forward EBITDA multiples.”

In addition to it giving up the right to 31 million shares of MDC, Stagwell has also proposed that each of Stagwell and Goldman Sachs & Co. LLC (together with its affiliates) would forego accretion under the terms of their respective preferred shares in the combined company for a period of one year following the closing of the Proposed Transaction and the Stagwell Net Debt Cap (as defined in the Transaction Agreement) would be increased to $285 million.

“When everything is taken into consideration,” Mr. Penn concluded, “this is a win-win proposition for investors, bondholders, customers and employees and it’s for this reason that Stagwell has gone one last mile to bring this deal over the finish line.”

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