Minnetonka-based Communications Systems is a company that sells connectivity products for broadband networks. But on Wednesday it said it is shifting gears by merging with a company that focuses on the growing home solar industry.
In the past year, Communications Systems (CSI) has sold a business line and plans on selling the rest as part of the strategy around merging with privately held Pineapple Energy, based in Wayzata.
The company also is adopting the Pineapple name, and its stock symbol will change from JCS to PEGY. Shares would continue to trade on Nasdaq.
"By reinventing [Communications Systems] through this proposed merger, we will set the stage to become a fast-growing and profitable company, with a focus on delivering immediate value to our shareholders while retaining an opportunity for long-term appreciation," Roger Lacey, the company's executive chairman, said in a news release.
A committee of Communications Systems' board of directors has been looking at ways to enhance shareholder value for the past three years, Lacey said in a conference call announcing the Pineapple merger.
Communications Systems sold its Suttle Inc. business in the last year. In December, the company decided that the remaining business units would grow better and deliver more value to different owners.
The divestiture of the remaining businesses will be used for a special dividend to existing CSI shareholders.
For 2019, its most recently reported fiscal year, the company had revenue of $51 million and earnings of $6.5 million.
Pineapple Energy was founded in 2020 by a Wayzata-based private-equity firm, Northern Pacific Group, to participate in the home solar energy business. Pineapple provides solar, battery storage and other energy services to homeowners.
Pineapple acquired a solar company in December and has agreements to buy two more Hawaii-based sustainable energy companies.
"We formed Pineapple in order to meet the growing demand for green home energy services by offering customers high-quality solutions in a transparent manner," Scott Honour, managing partner of Northern Pacific Group, said in a news release.
The merger of Communications Systems and Pineapple also means the combination of their management teams. Lacey will remain executive chairman and the company's chief financial officer, Mark Fandrich, will maintain his role as well. Pineapple's chief executive, Kyle Udseth, will become CEO of the combined company.
Udseth said on the conference call that Pineapple's focus is on connecting residential solar arrays to home battery storage using software to monitor and regulate the power usage. Ultimately, Pineapple would connect its rooftop residential customers so they may be able to sell excess renewable energy back to the grid.
Communications Systems shareholders would hold about 37% of the total shares of the new company when the deal concludes and would get a special dividend from pre-merger divestitures. Pineapple investors would get a certain number of shares at the merger's close and be eligible for more shares based on milestones achieved within the next two years.
The Communications Systems board has approved the merger but the deal is still subject to shareholder approval.
Patrick Kennedy • 612-673-7926