Transaction Provides Profitable Growth Platform, Significant Free Cash Flow and Earnings
- Steel Partners Holdings to Increase Ownership Stake in ModusLink with $35 Million Investment
- Jack L. Howard and William T. Fejes, Jr. Join ModusLink Board of Directors

NEW YORK and WALTHAM, Mass., ModusLink Global Solutions, Inc. (NASDAQ: MLNK) and Steel Partners Holdings (NYSE: SPLP) today announced that ModusLink has completed the acquisition of privately-held IWCO Direct, a leading provider of data-driven direct marketing solutions, for $476 million in cash.

Warren Lichtenstein, Executive Chairman of ModusLink, said, "We have been looking to acquire a profitable business with attractive operations and financials, and with a strong management team in order to leverage our approximately $2.1 billion in net operating loss carryforwards (NOLs) and cash. We found a great fit in IWCO Direct. We essentially double the size of our Company and add significant earnings and free cash flow. We add a market leader with industry-leading solutions, a client base consisting of Fortune 500 companies, and significant opportunities to drive both top- and bottom-line results. We intend to aggressively grow IWCO Direct, organically and through acquisitions, and will look to leverage Steel Partners' vast relationships and resources to drive operational excellence and enhance stakeholder value."

With this transaction completed, IWCO Direct becomes a wholly-owned subsidiary of ModusLink Global Solutions. IWCO Direct will continue to be run by Jim Andersen, who has been CEO since 1999. ModusLink Corporation, the Company's digital and physical supply chain business, will continue to be run by Jim Henderson.

For the last 12 months through October 2017, IWCO Direct had net revenue of $470.6 million, net income of $18.9 million and Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") of $82.2 million. For the last 12 months through October 2017, ModusLink had net revenue of $417.8 million, a net loss of $22.5 million and negative EBITDA of $3.8 million, although net loss and EBITDA improved by $32.5 million and $28.0 million year-over-year, respectively, as a result of the corporate turnaround plan launched in May 2016. Select financial statements will be included on Form 8-K/A, which will be filed with the Securities and Exchange Commission within 75 days following closing.

IWCO Direct has consistently delivered highly-effective data-driven marketing solutions for its customers, which represent some of the largest and most respected brands in the world. Its full range of services includes strategy, creative and production for multichannel marketing campaigns, along with one of the industry's most sophisticated postal logistics programs for direct mail. Through its Mail-Gard® product, IWCO Direct also offers business continuity and disaster recovery services to protect against unexpected business interruptions, along with providing print and mail outsourcing services. IWCO Direct is the largest direct mail production provider in North America, with the largest platform of continuous digital print technology and a growing direct marketing agency service. Their solutions enable customers to improve Customer Lifetime Value (CLV), which in turn, has led to increased revenue and longer customer relationships.

"We are excited to join forces with ModusLink," said Jim Andersen. "Their commitment and expertise, combined with our advanced data-driven marketing solutions, make this new combination advantageous for IWCO Direct's customers and employees as well as our new shareholders. The future of data-driven direct marketing has never been stronger. The flexibility of becoming part of a global organization will allow us to continue to invest in new technologies and service offerings, further driving value and a greater return on marketing investment for our customers to strengthen their customer relationships and increase revenue."

Funding for the acquisition of IWCO Direct was provided through cash and debt financing provided by Cerberus Business Finance, LLC, as the Administrative Agent and Collateral Agent, and consists of a term loan in the principal amount of $393.0 million and a borrowing in the amount of up to $25.0 million under a revolving credit facility.

Additionally, it was announced today that Steel Partners Holdings L.P. (NYSE: SPLP) increased its investment in ModusLink through its affiliate SPH Group Holdings, LLC, with a $35.0 million convertible preferred stock investment, which together with its affiliates, brings its beneficial ownership in ModusLink to approximately 52%. Proceeds from the $35.0 million convertible preferred stock investment will be used for working capital and general corporate purposes. The preferred stock transaction was approved by a special committee consisting of independent directors of ModusLink who are not affiliated with Steel Partners.

It was also announced today that Jack L. Howard, President of Steel Partners, and William T. Fejes, Jr., President of Steel Services Ltd., will join the ModusLink board of directors, expanding the board to seven members and filling one existing vacancy.

ModusLink's advisors on the transactions included the law firms of Ice Miller LLP, Littman Krooks LLP, and Olshan Frome Wolosky LLP, while Stout Advisory served as financial advisor.