Lawson Products to Merge with TestEquity and Gexpro Services.

MANews-(C)2009-2021

US-based MRO marketplace products and services distributor Lawson Products, Inc. (NASDAQ: LAWS) and US-based wealth management firm Luther King Capital Management Corp's LKCM Headwater Investments private investment arm have inked definitive merger agreements under which Lawson will combine with two of LKCM Headwater's portfolio companies, TestEquity and Gexpro Services, in an all stock transaction, the company said.

The affiliates of LKCM Headwater that currently own TestEquity and Gexpro Services will receive solely Lawson common stock as consideration for the transactions.

All three leading niche industrial distribution companies will be brought under a holding company with all three companies operating independently with their existing management teams as separate divisions.

Upon closing of the combination, Lawson's capitalization is expected to consist of approximately 19.4m shares, of which approximately 9.1m shares, or 47%, would be held by existing Lawson shareholders, 3.3m shares, or 17%, would be held by the existing owners of TestEquity (including LKCM Headwater affiliates and the TestEquity management team), and 7m shares, or 36%, would be held by the existing owners of Gexpro Services (including LKCM Headwater affiliates and the Gexpro Services management team).

Existing owners of TestEquity and Gexpro Services also have the ability to earn an additional 700,000 shares and 1m shares, respectively, upon achieving certain additional accretion and other metrics set forth in the merger agreements.

Affiliates of LKCM Headwater currently beneficially own approximately 48% of Lawson's outstanding shares.

Upon completion of the combination, affiliates of LKCM Headwater will beneficially own approximately 75% of Lawson's shares, and their ownership would increase to approximately 77% of Lawson's shares if all of the 1.7m additional shares are earned.

All Lawson shares outstanding immediately before the completion of the combination will remain outstanding after the combination, and existing Lawson shareholders will continue to hold shares in the combined company.

The holding company structure is expected to enable Lawson, TestEquity and Gexpro Services to maintain their respective high-touch, technical, value-added service delivery models and customer relationships within their specialty distribution businesses under a leadership of their separate business unit management teams with continued oversight from Lawson's...

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