Skullcandy Inc. (NasdaqGS: SKUL) accepted and then rejected two acquisition proposals from the same company over the weekend after the bidder lowered its unsolicited offer by 25 cents per share and said it was unwilling to pay a $6.6 million fee to break up an existing merger agreement.
On Sunday, Mill Road Capital Management LLC lowered its offer for Skullcandy to $6.25 per share. That still represented a 2.5 percent, or 15 cents per share, premium to the purchase price stipulated in Skullcandy’s previously announced definitive merger agreement with Incipio LLC. Mill Road had offered $6.50 a share August 13, but rescinded that offer within 24 hours after disclosing it had not been approved by potential lenders.
In submitting its lower bid Sunday, Mill Road “indicated to Skullcandy” that it was not prepared to execute the proposed merger agreement should Skullcandy’s board of directors accept it, according to a statement issued by Skullcandy. Furthermore, Mill Road told Skullcandy it was unwilling to pay the $6.6 million termination fee that would become payable to Incipio if Skullcandy were to terminate their merger agreement.
Based on these caveats, a “Strategic Transactions Committee” of Skullcandy’s board of directors determined that Mill Road’s latest proposal was unlikely to lead to a “superior proposal” as defined in its merger agreement with Incipio.
As a result, Skullcandy said it is obligated by its agreement with Incipio to cease negotiations and discussions with Mill Road and continue to recommend its stockholders tender their shares pursuant to the transaction with Incipio.
Skullcandy, which is based in San Francisco, traces its origins back to providing earbuds and other personal audio accessories to action sports enthusiasts. It also owns the Astro Gaming brand.
