Turtle Beach Announces Transformational Acquisition of PDP and Intention to Launch Reverse Dutch Tender Auction

Turtle Beach Corporation (Nasdaq: HEAR) (“Turtle Beach” or the “Company”), a leading gaming accessories brand, announced today that following the Company's establishment of a Value Enhancement Committee in 2023, the Board of Directors (the “Board”) has approved comprehensive and value-creative changes to its business, capital allocation and senior leadership. In consultation with its financial and legal advisors over the past year, the Company considered a comprehensive range of strategic, operational and financial alternatives on behalf of shareholders, including a full sale of the Company, and following the completion of its review, announced the following updates:

Strategic Acquisition of Performance Designed Products (“PDP”)

Turtle Beach today announced the execution of definitive agreements to acquire PDP, a leading gaming accessories provider at an enterprise value for PDP of $118 million (the “Transaction”). PDP is a privately held third-party gaming accessories leader that designs and distributes aftermarket video game accessories, including controllers, headsets, power cases, and other accessories. The Transaction combines two leading gaming companies with industry-leading teams, significant product momentum and proven track records of delivering profitable growth. The Transaction substantially grows the size of Turtle Beach. Bringing PDP’s leading gaming controller category to Turtle Beach will provide additional scale and create future development opportunities. Furthermore, the Company provided the following strategic rationale:

• The combined company anticipates total revenues of $390 to 410 million in the first full 12 months of ownership (Q2 2024 through Q1 2025).
• The post-synergy Adjusted EBITDA of PDP is projected to be $22 to $28 million in the first full 12 months of ownership (Q2 2024 through Q1 2025) implying a post-synergy transaction multiple of 4.7x at the mid-point of estimated 2024 Adjusted EBITDA.
• Turtle Beach expects $10 to $12 million of anticipated annual run-rate cost synergies for the transaction, with upside for incremental revenue synergies, best practice sharing and further cost synergies over time.
• Acquiring PDP at an attractive valuation multiple relative to the trading multiples of peers implies potential significant upside in market value for the combined company.
• Diversis Capital, a Los Angeles-based private equity firm and PDP’s majority owner, will become the largest shareholder of Turtle Beach with approximately 16% of the pro forma basic shares outstanding prior to the expected modified Dutch Tender Offer and will add one of its Senior Operating Partners, David Muscatel, to the Turtle Beach Board.

Consideration for the Transaction consists of the issuance of 3.45 million shares of Turtle Beach's common stock and approximately $79.9 million in cash. The Transaction is expected to be immediately accretive to Turtle Beach shareholders on key metrics including the Company’s growth prospects, strategic positioning with retailers and customers, and financial profile.