ALJ Regional Holdings, Inc. Announces Agreement to Sell KES Acquisition Company

ALJ Regional Holdings, Inc. Announces Agreement to Sell KES Acquisition Company

ASHLAND, Ky.--(BUSINESS WIRE)-- ALJ Regional Holdings, Inc. (Pink Sheets: ALJJ) ("ALJ") today announced that it and KES Acquisition Company, its majority-owned subsidiary ("KES"),have entered into a definitive merger agreement (the "Merger Agreement")for the sale of KES to Optima Specialty Steel, Inc. ("Optima") for $112.5 million in cash (the "Merger"). Following the repayment of all of KES' outstanding debt and preferred stock, as well as the transaction expenses related to the Merger, ALJ is expected to have cash-on-hand of approximately $51 million, or$0.86 per share, based on 59,467,498fully diluted shares outstanding as of November 19, 2012.


Jess Ravich, Chairman of the Board, commented, "I am very proud of what we have accomplished today for our stockholders. When the current members of the board joined ALJ, it had no operating business, less than one million dollars in cash, liabilities of over $14 million and an accumulated deficit of over $340 million. Through the hard work of the board, the support of our lenders and the amazing job of our employees and management company, Pinnacle Steel, LLC, proforma for the merger, ALJ will have over $50 million in cash, no debt and stockholders' equity of over $50 million."

Additionally, ALJ announced that, in connection with the Merger, it is launching a self-tender offer (the "Tender Offer") to use approximately 50% of its expected cash immediately following closing of the Merger to acquire up to approximately 50% of its outstanding common stock. The Tender Offer is structured as a modified "Dutch auction" tender offer for up to 30,000,000 shares of ALJ's common stock at a price per share not greater than $0.86 and not less than $0.84.The Tender Offer will expire on December 24, 2012, unless extended. The Tender Offer is subject to certain terms and conditions, including the closing of the Merger and, assuming satisfaction of those conditions, is expected to close in late December 2012.A stockholder holding substantially in excess of 5% of ALJ's common stock has agreed to tender his shares in the Tender Offer and to vote in favor of the Merger. Mr. Ravich has agreed not to tender any of his shares in the Tender Offer and to vote in favor of the Merger. The remaining officers and directors of ALJ also have agreed to vote their shares in favor of the Merger.

In connection with the Merger and Tender Offer, ALJ has decided to postpone any re-listing of its stock on a national exchange until such time when it has substantial operations and the Board determines that the cost of such listing is warranted and beneficial to ALJ stockholders.

Mr. Ravich continued, "By launching the Tender Offer, we are allowing those stockholders who desire liquidity and the ability to monetize the over 30% compounded IRR in ALJ's stock since I joined the board in 2006 to do so. Those stockholders who desire to keep their interests in ALJ may do so by not tendering." John Scheel, ALJ's CEO and a principal of Pinnacle Steel, LLC added, "It has been extremely gratifying to have taken a mill that was closed, re-open it and make it into a world class provider of SBQ and MBQ steel products."

Upon completion of the Merger, ALJ will have no or nominal operations and, other than the cash proceeds, no material assets. ALJ intends to retain the remaining proceeds from the Merger for future acquisitions. At this time no specific acquisition targets have been designated and there can be no guarantee that ALJ will designate a suitable target within any particular time frame, or at all. Further, even if a target is identified, there is no guarantee that ALJ will be successful in acquiring such target on commercial terms or at all. Such a target company (or assets) might be in any industry. In the event that ALJ is not successful in acquiring one or more operating businesses within a reasonable period of time, the Board of ALJ will determine an appropriate course of action with respect to ALJ's remaining cash-on-hand.

Under the terms of the Merger Agreement, a wholly owned subsidiary of Optima will be merged with and into KES with KES surviving the Merger as a wholly owned subsidiary of Optima. Optima will cause the surviving corporation to recognize the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (the "Union") as the bargaining representative for KES' employees, and accept and continue to honor the terms of the May 4, 2008 agreement by and between KES and the Union.

The closing of the Merger is subject to customary conditions, including approval by ALJ's stockholders and review by U.S. regulators.

ALJ expects to hold a special meeting of stockholders for consideration of the proposed Merger on or about December 21, 2012. ALJ also expects that the Merger, which has been unanimously approved by ALJ's board of directors, subject to the satisfaction of the closing conditions including the approval of the Merger by ALJ's stockholders, will close on or about December21, 2012 and that the Tender Offer will close shortly thereafter in late December.

The Merger Agreement contains certain termination rights for ALJ, KES and Optima, including, without limitation, if the Merger is not consummated on or before February 28, 2013 (including as a result of Optima not obtaining financing) and if the approval of the stockholders of ALJ or KES is not obtained. The Merger Agreement also provides that the Merger Agreement may be terminated, by ALJ or KES at any time prior to December 31, 2012, if Optima has not been able to finance the Merger.

Houlihan Lokey Capital, Inc. and Roth Capital Partners, LLC acted as the financial advisors and Morrison & Foerster LLP acted as legal counsel to ALJ Regional Holdings, Inc. and KES Acquisition Company. Jefferies & Company, Inc. acted as the financial advisor and Baker & McKenzie acted as legal counsel to Optima.

Further detailed information about the Merger, including a copy of the Merger Agreement, can be found in the "Current Report" located electronically on ALJ's website at http://www.aljregionalholdings.com and at www.pinksheets.com.

About ALJ Regional Holdings, Inc.

ALJ is the parent company of KES Acquisition Company, the owner and operator of a steel mini-mill near Ashland, Kentucky producing both merchant bar quality flats (MBQ Bar Flats), and special bar quality steel flats (SBQ Bar Flats).

How to Find Further Information

This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval. ALJ will deliver a proxy statement and other relevant documents to its stockholders in connection with the special meeting of ALJ stockholders to be held to approve the proposed Merger. Additionally, an Offer to Purchase and other relevant documents describing the Tender Offer in detail are being distributed in connection with the launch of the Tender Offer. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION (INCLUDING ANY DECISION TO PARTICIPATE IN THE TENDER OFFER), WE URGE STOCKHOLDERS AND INVESTORS TO READ THE PROXY STATEMENT AND TENDER OFFER DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND PROPOSED TENDER OFFER. The proposals for the Merger will be made solely through the proxy statement and any offers to buy securities will be made solely through the tender offer documents, as they may be amended or supplemented. Copies of the proxy statement and tender offer documents (when they become available) may be obtained free of charge from ALJ or its representatives. Stockholders will also be able to obtain, free of charge, copies of the proxy statement, tender offer documents and certain other documents (when they become available) of ALJ in connection with the Merger and the Tender Offer at the Pink Sheets website at http://www.pinksheets.com and www.aljregionalholdings.com. For additional information about the Merger or Tender Offer, please contact our Information Agent as set forth below:

AST Phoenix Advisors
110 Wall Street, 27th Floor
New York, NY 10005
Banks and brokers call (212) 493-3910
All others call toll free (877) 478-5038

Forward-Looking Statements

This announcement contains, or may contain, "forward-looking statements" concerning ALJ. Generally, the words "believe," "anticipate," "expect," "may," "should," "could," and other future-oriented terms identify forward-looking statements. Forward-looking statements include, but are not limited to, statements relating to the following: (i) the proposed Merger and Tender Offer; (ii) statements set forth in the CEO's and Chairman's quotes; (iii) the anticipated timing of the stockholder meeting, completion of the proposed Merger and the proposed Tender Offer; (iv) expectations about completing the financing for the Merger and completion of the Merger and (v) assumptions underlying any of the foregoing statements.

These forward-looking statements are based upon the current beliefs and expectations of the management of ALJ and involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond ALJ's ability to control or estimate precisely and include, without limitation: (i) the failure to satisfy any of the conditions to complete the Merger, including the receipt of the required stockholder approval and completion of the financing; (ii) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or failure of the Merger; (iii) the outcome of any legal proceedings instituted in connection with the proposed Merger; (iv) uncertainties as to the amount, if any, of our cash that ALJ stockholders may receive in the future; (v) the risk that anticipated benefits from the Merger and post-closing operations of ALJ may not be realized or may take longer to realize than expected; (vi) the risk that estimated or anticipated costs, charges and liabilities to be incurred in connection with effecting the contemplated transactions may differ from or be greater than anticipated; (vii) the effect of any regulatory approvals or conditions imposed on us in connection with the Merger; (viii) ALJ's ability to designate appropriate acquisition targets in the future and to consummate acquisitions on commercially reasonable terms and (ix) changes in tax laws or regulations regarding the use and/or preservation of net operating losses. The Tender Offer is conditioned on the closing of the Merger, and so is effectively subject to all of the conditions of the Merger, as well as certain other conditions to the Tender Offer, as described in the Tender Offer documents.

ALJ also is subject to general business risks, including its success in continuing to settle its outstanding obligations from its prior business activities, results of tax audits, its ability to retain and attract key employees, acts of war or global terrorism, and unexpected natural disasters and other risks and uncertainties, including those detailed from time to time in its periodic reports (whether under the caption Risk Factors or Forward Looking Statements or elsewhere). ALJ cannot give any assurance that such forward-looking statements will prove to have been correct. The reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this announcement. Neither ALJ nor any other person undertakes any obligation to update or revise publicly any of the forward-looking statements set out herein, whether as a result of new information, future events or otherwise.

Participants in the Solicitation

The directors and executive officers of ALJ may be deemed to be participants in the solicitation of proxies in connection with the approval of the proposed transaction.ALJ plans to issue a proxy statement in connection with the solicitation of proxies to approve the proposed transaction. Information regarding ALJ's directors and executive officers and their respective interests in ALJ and KES by security holdings or otherwise is available in its Annual Report for the year ended September 30, 2011 and will be included in the Proxy Statement once it becomes available.



ALJ Regional Holdings, Inc.
Jess Ravich, 310-789-5741

KEYWORDS:   United States  North America  Kentucky

INDUSTRY KEYWORDS:

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