GLOBAL SELF STORAGE, INC. (NASDAQ:SELF) Files An 8-K Entry into a Material Definitive Agreement

GLOBAL SELF STORAGE, INC. (NASDAQ:SELF) Files An 8-K Entry into a Material Definitive Agreement

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Item 1.01 Entry into a Material Definitive Agreement.

On November 23, 2016, Global Self Storage, Inc. (the
“Company”), entered into an agreement (the “Purchase
Agreement”) with Tuxis Corporation (“Tuxis”), a Company
affiliate, to acquire all of the membership interests of each of
Tuxis Self Storage I LLC (“TSS I”), Tuxis Self Storage II LLC
(“TSS II”), and Tuxis Real Estate II LLC (“TRE II”), each a
wholly owned Tuxis subsidiary (collectively, the
“Subsidiaries”), for the aggregate purchase price of $7,800,000
(the “Purchase Price”), comprised of $5,925,000 payable in
cash, $975,000 in shares of the Company’s common stock, and,
contingent upon the satisfaction of certain conditions described
in the Purchase Agreement, an additional $900,000 cash payment.
The closing of the acquisition is subject to certain conditions
precedent under the Purchase Agreement including, among others,
approval by Tuxis stockholders.
TSS I is the owner and operator of a 185 unit, 25,705 square foot
self storage facility located in Clinton, Connecticut. TSS II is
the owner and operator of a 142 unit, 15,000 square foot self
storage facility located in Millbrook, New York. TRE II owns a
1,875 square foot commercial property located in Millbrook, New
York which adjoins the property held by TSS II. TSS II and TRE II
together have applied to the local municipality for permission to
re-develop the parcels and properties to expand TSS II’s
existing self storage facility.
Background
On November 21, 2016, upon the unanimous recommendations of a
special committee of independent disinterested directors (the
“Special Committee”) of the Company’s Board of Directors (the
“Board”), the Board authorized the acquisition of all of the
membership interests of the Subsidiaries and the Company’s entry
into the Purchase Agreement by and between the Company and Tuxis.
Tuxis has the same Chairman of the Board, President, and Chief
Executive Officer as the Company. In addition, Tuxis has
substantially the same officers as the Company and also has a
number of employees in common with the Company. Mark C. Winmill
is a director, Chairman of the Board, President, and Chief
Executive Officer of the Company and Tuxis. Thomas O’Malley is
Treasurer, Chief Financial Officer, and a Vice President of the
Company and Tuxis. John F. Ramrez is Secretary, General Counsel,
and a Vice President of the Company and Tuxis. Thomas B. Winmill,
the brother of Mark C. Winmill, is a Vice President of Tuxis and
a director and Vice President of the Company.
Each of Mark C. Winmill and Thomas B. Winmill is a trustee of the
Winmill Family Trust, which owns all of the voting stock of
Winmill Co. Incorporated (“Winco”). As of October 11, 2016, the
record date for Tuxis’ stockholder meeting (the “Record Date”)
to consider, among other things, the Purchase Agreement, Midas
Securities Group, Inc. (“Midas Securities”), a wholly owned
subsidiary of Winco, owned 234,665 shares (or approximately 19%)
of Tuxis’ outstanding shares of common stock. Additionally, as
of the Record Date, Winco and Tuxis owned approximately 1.7% and
0.3%, respectively, of the Company’s outstanding common stock.
Mark C. Winmill and Thomas B. Winmill may be deemed to have
indirect beneficial ownership of these shares owned by Midas
Securities, Winco, and Tuxis, respectively, as a result of their
status as controlling persons of the Winmill Family Trust. Each
of Mark C. Winmill and Thomas B. Winmill disclaims beneficial
ownership of these shares. to the recommendation of a special
committee of independent disinterested directors of Winco’s
Board of Directors, Winco intends to vote all of the Tuxis shares
held by Midas Securities in favor of the sale of the
Subsidiaries.
On November 18, 2016, the Tuxis Board of Directors authorized a
special dividend to Tuxis stockholders of $0.10 per share of
Tuxis common stock contingent upon the Closing (as defined
herein) of the Purchase Agreement. Accordingly, assuming Midas
Securities continues to hold its shares until the record date for
the special dividend and there are no changes in Tuxis’
outstanding shares between October 11, 2016 and the record date
which is set for the special dividend, Midas Securities shall be
entitled to receive a cash dividend of approximately $23,467 that
will be paid if the sale of the Subsidiaries is consummated and
the Closing occurs. In addition, if the sale of the Subsidiaries
is consummated and the Closing occurs, Tuxis currently intends to
use a portion of the proceeds to pay down its liabilities due to
certain affiliates, including Winco, in the amount of
approximately $1 million. However, the Tuxis Board of Directors
reserves the right to change Tuxis’ intended use of the proceeds
following the Closing.
Among other things, due to the commonality of a director and the
officers of the Company and Tuxis, the Board formed the Special
Committee in seeking to ensure that the acquisition is fair to
Company stockholders and in the best interests of the Company.
The Special Committee is comprised of Russell E. Burke III,
George B. Langa, and William C. Zachary, each an independent
disinterested director of the Company. The Special Committee was
granted the power to retain counsel and other advisers, to
review, negotiate, and evaluate the terms of the acquisition of
the Subsidiaries to the Purchase Agreement and determine whether
to recommend to the Board that the Board approve the acquisition
of the Subsidiaries and the Purchase Agreement. The Special
Committee and the Board each met four times to consider the
acquisition of the Subsidiaries.
After careful consideration, the Special Committee’s unanimous
recommendations were determined based on a number of factors
including, among other things: negotiations between the Company
and Tuxis overseen by the Special Committee and a special
committee of Tuxis’ independent disinterested directors, Susan
Parker and Timothy Taft, that took place from February 2016 to
November 2016; valuation analyses by independent financial
advisors; independent third party real estate appraisals; and
market capitalization rates. The Special Committee received a
fairness opinion from an independent financial advisor, Akin Bay
Company LLC (“Akin Bay”), that the consideration to be paid by
the Company for the acquisition of the Subsidiaries to the
Purchase Agreement is fair, from a financial metrics point of
view, to the Company’s stockholders. In connection with Akin
Bay’s fairness opinion, among other things, Akin Bay: analyzed
Tuxis’ historical financial statements; reviewed the Company’s
capital investment plan to expand TSS II’s existing self storage
facility; analyzed multi-year financial projections; conducted
traditional valuation analyses of the Properties (as defined
herein), which included discounted cash flow, present value,
comparable public company valuation and independent third party
real estate appraisals; conducted a personal site survey of the
Properties; reviewed valuation statistics for selected publicly
traded real estate investment trusts that focus on investing in
self-storage real estate; discussed with Company management the
current and prospective performance of the Company, the
Properties, market conditions and pricing parameters for
properties similar to the Properties owned by the Company;
reviewed the Purchase Agreement and the Registration Rights
Agreement (as defined herein); and conducted such other analyses
that were deemed appropriate.
Purchase Agreement
The Purchase Agreement contains customary representations and
warranties as to, among other things: the organization, good
standing, and qualifications to conduct the business of the
Company, Tuxis, and the Subsidiaries; the condition of the
properties owned by the Subsidiaries (the “Properties”); the
tenant leases; Tuxis’ title to its assets, including, the
Subsidiaries’ good and marketable title to the Properties;
Tuxis’ power and authority to transfer the membership interests;
the valid and marketable title of the membership interests free
and clear of all liens; the Company’s authorization to issue the
common stock; the validity of the Company’s common stock to be
issued; compliance with applicable laws; the Company’s
regulatory filings; Tuxis’ and the Subsidiaries’ employees and
personal property; environmental reports regarding the
Properties; and the financial statements of the parties. The
Purchase Agreement also provides that the Company has the right
to conduct due diligence with respect to the Properties and to
access the Properties and information regarding the Properties.
to the Purchase Agreement, the Company has the right to terminate
the Purchase Agreement, for any reason or for no reason,
including if the sale of the Subsidiaries is not approved by
Tuxis’ stockholders, before the expiration of the due diligence
period. It is currently the understanding of the Company and
Tuxis that, if the Purchase Agreement is terminated for certain
reasons, the Purchase Agreement obligates Tuxis to pay the
Company reasonable out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to the Company)
incurred by the Company or on its behalf in connection with or
related to the authorization, review, negotiation, execution, and
performance of the Purchase Agreement up to a maximum of $50,000.
The closing of the sale of the Subsidiaries to the Purchase
Agreement (the “Closing”) is subject to customary conditions
precedent, including the requirements that all representations
and warranties are true and correct in all material respects as
of the Closing date, all required covenants and agreements have
been performed in all material respects, any pre-Closing
governmental inspections and other requirements as to the
Properties have been completed and the Company has delivered the
Purchase Price (other than the $900,000 contingent payment
described in the Purchase Agreement). Subject to the terms of the
Purchase Agreement, the Closing shall be that date which is not
more than forty-five (45) days after the satisfaction of all
conditions to Closing under the Purchase Agreement.
Notwithstanding the foregoing, it is currently the understanding
of the Company and Tuxis that the the Closing will occur on or
before the later of 15 calendar days after (a) completion of the
due diligence period described in the Purchase Agreement or (b)
approval of the Purchase Agreement by Tuxis’ stockholders,
provided that the Company elects to proceed to Closing to the
Purchase Agreement.
Registration Rights Agreement
The Company’s common stock to be issued to Tuxis as part of the
Purchase Price is expected to be unregistered and therefore
subject to certain restrictions. At the Closing, the Company and
Tuxis will enter into a registration rights agreement (the
“Registration Rights Agreement”) which permits Tuxis to request
the registration of the Company common stock to be issued to
Tuxis as part of the Purchase Price. Under the Purchase
Agreement, the number of shares of Company common stock to be
issued will be equal to $975,000 divided by the volume weighted
average closing price per share as reported by the Nasdaq Capital
Market (“NASDAQ”) for the thirty (30) consecutive trading days
ending on the date that is five (5) days immediately preceding
the Closing date, subject to adjustment in the event of any
change in the outstanding shares of common stock of the Company
including by reason of any reclassification, recapitalization,
stock split, combination, exchange or readjustment of shares, or
any stock dividend, in which event the number of shares of common
stock will be appropriately adjusted. The methodology for the per
share issuance price of the Company’s common stock was
determined based on a number of factors including, among others,
negotiations between the Company and Tuxis, analyses by
independent financial advisors including Akin Bay, the restricted
nature of the stock to be issued, and historical market prices
and trading volume. On November 22, 2016, the last trading date
before the date the Company publicly announced that it had
entered into the Purchase Agreement, the closing price of its
common stock as reported by NASDAQ was $4.88 per share.
Subject to certain limitations, upon a request from the holders
of at least 50% of the registrable securities, as defined in the
Registration Rights Agreement, Tuxis will be entitled to cause
the Company to file up to two shelf registration statements and
to keep them effective until the earliest of the date when all
the registrable shares can be sold without restriction under Rule
144, all the shares have been sold under the registration
statements or Rule 144, or two years after the effective date of
the registration statement. Additionally, the holders of the
registrable securities will be entitled to “piggy-back”
registration rights with respect to any underwritten offering
proposed by the Company (other than offerings under any employee
benefit plan, to Rule 145 or related to stock issued upon
conversion of debt), provided that each “piggy-back” request
must include at least 20% of the registrable securities then held
by the holder. The Company will bear the expenses incurred in
connection with the filing of any such registration statements,
other than certain underwriting discounts, selling commissions,
and expenses related to the sale of shares. The registration
rights of Tuxis and its permitted transferees will be subject to
customary black-out periods, cutback provisions, and other
limitations as set forth in the Registration Rights Agreement.
The Registration Rights Agreement also includes customary
indemnification provisions. The holders’ registration rights
will terminate upon the earlier of the date when the holder may
sell all of its registrable shares without restriction under Rule
144 and five years after January 19, 2017.
The foregoing description is qualified in its entirety by the
full terms and conditions of the Registration Rights Agreement
and Purchase Agreement, filed as Exhibits 4 and 10, respectively,
to this Current Report on Form 8-K, and incorporated herein by
reference. The Company’s press release announcing the entry into
the Purchase Agreement is filed on Exhibit 99.1 to this Current
Report on Form 8-K and incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information provided in Item 1.01 of this Current Report on
Form 8-K pertaining to the issuance of shares of the Company’s
common stock is incorporated by reference into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits. The following exhibit is being furnished herewith
to this Current Report on Form 8-K.
Exhibit No.
Description
Form of Registration Rights Agreement by and between the
Company and Tuxis
Purchase Agreement by and between the Company and Tuxis,
dated as of November 23, 2016
99.1
Global Self Storage, Inc. Press Release, dated November 23,
2016, announcing entry into the Purchase Agreement
* * *


About GLOBAL SELF STORAGE, INC. (NASDAQ:SELF)

Global Self Storage, Inc., formerly Self Storage Group, Inc., is a self-administered and self-managed real estate investment trust. The Company is focused on the ownership, operation, acquisition, development and redevelopment of self-storage facilities. Its self-storage facilities are designed to offer storage space for residential and commercial customers. It owns and operates approximately eight self-storage properties located in New York, Pennsylvania, Illinois, Indiana, South Carolina and Ohio. Its facilities include approximately 485,580 net rentable square feet and over 3,810 storage units. Its facilities feature both covered and outside auto/recreational vehicle (RV)/boat storage. Its facilities feature a rental and payment center. It owns and operates self-storage properties through its subsidiaries, including SSG Bolingbrook LLC, SSG Dolton LLC, SSG Merrillville LLC, SSG Rochester LLC, SSG Sadsbury LLC, SSG Summerville I LLC, SSG Summerville II LLC and SSG Operations LLC.

GLOBAL SELF STORAGE, INC. (NASDAQ:SELF) Recent Trading Information

GLOBAL SELF STORAGE, INC. (NASDAQ:SELF) closed its last trading session down -0.02 at 4.99 with 23,612 shares trading hands.

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