Skullcandy (SKUL) Announces Entry into New Merger Agreement with Mill Road for $6.35/Share
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Skullcandy, Inc. (Nasdaq: SKUL) announced the termination of the previously announced merger agreement (the “Incipio Merger Agreement”) with Incipio, LLC (“Incipio”), and the entry into a new merger agreement (the “Mill Road Merger Agreement”) with MRSK Hold Co. and MRSL Merger Co., entities affiliated with Mill Road Capital Management LLC (collectively, “Mill Road”). Under the terms of the Mill Road Merger Agreement, outstanding shares of common stock of Skullcandy will be exchanged for $6.35 per share in cash at the completion of the merger, or a total of approximately $196.6 million.
On August 17, 2016, Skullcandy’s Board of Directors (the “Skullcandy Board”) received a written offer from Mill Road to acquire all outstanding shares of Skullcandy’s common stock for a price of $6.35 per share in cash, which the Skullcandy Board determined constituted a “Superior Proposal” under the Incipio Merger Agreement. On August 23, 2016, the period during which Incipio was entitled to negotiate with Skullcandy to amend the Incipio Merger Agreement pursuant to its terms expired, and Incipio informed Skullcandy that it did not intend to submit a proposed amendment to the Incipio Merger Agreement. As a result, later on August 23, 2016, the Skullcandy Board authorized Skullcandy to terminate the Incipio Merger Agreement, pay the termination fee to Incipio and enter into the Mill Road Merger Agreement.
Hoby Darling, Skullcandy, Inc. President and CEO commented, “We are extremely pleased with Mill Road’s interest in partnering with Skullcandy. For our public stockholders, the merger represents a significant premium to the share price prior to the initial announcement of a potential strategic transaction in June. At the same time, returning to private ownership under Mill Road provides us with the flexibility and resources to continue to expand our uniquely positioned business. We believe Mill Road’s experience stewarding branded consumer companies will help accelerate the growth of our Skullcandy and Astro brands. We look forward to accessing the experience, operational expertise and capital that partnering with Mill Road affords as we step up our efforts to excite our consumers and retail partners through our world-class audio and gaming platforms.”
Thomas Lynch, Mill Road’s Founder, stated, “We are excited to welcome Skullcandy and Astro Gaming to our growing portfolio of high quality, distinctively branded companies. We have followed Skullcandy for several years and look forward to working with the company as it takes this important step in its history. We are impressed by how the company has grown and have the highest confidence in the company’s future. We are pleased to be able to increase our 9.8% ownership stake in the company.”
The purchase price pursuant to the Mill Road Merger Agreement represents approximately a 4% premium over the existing Incipio offer of $6.10 per share in cash and approximately a 43% premium over Skullcandy’s closing share price on June 22, 2016, the last trading day prior to the initial announcement of the Incipio Merger Agreement.
The transaction with Mill Road is not subject to a financing condition.
Terms of the Agreement
Under the terms of the Mill Road Merger Agreement, an affiliate of Mill Road will commence a cash tender offer to acquire Skullcandy’s outstanding shares of common stock for $6.35 per share, net to each holder in cash. Following receipt of required regulatory approvals and the satisfaction of other customary closing conditions, and after such time as all shares tendered in the tender offer are accepted for payment, the Mill Road Merger Agreement provides for the parties to effect, as promptly as practicable, a merger which would result in all shares not tendered in the tender offer being converted into the right to receive $6.35 per share in cash. The transaction has been approved by the Skullcandy Board and Mill Road’s Investment Committee and is expected to close in the third quarter of 2016.
The Mill Road Merger Agreement contains non-solicitation provisions, pursuant to which Skullcandy must cease all existing discussions and may not solicit or participate in any additional discussions with third parties regarding alternative proposals, subject to certain exceptions.
Peter J. Solomon Company is acting as financial advisor and Latham & Watkins LLP is acting as legal advisor to Skullcandy. Foley Hoag LLP is acting as legal advisor to Mill Road and its affiliates.
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Create E-mail Alert Related CategoriesCorporate News, Hot Corp. News, Management Comments, Mergers and Acquisitions
Related EntitiesMill Road Capital, Definitive Agreement, 14D9
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