Skullcandy Inc. plans to explore a merger proposal with Mill Road Capital Management that may derail its anticipated merger with Incipio LLC.
The audio company announced the expiration of the “go-shop” period pursuant to the terms of the previously announced definitive merger agreement pursuant to which Skullcandy has agreed to be acquired by a direct wholly-owned subsidiary of Incipio LLC.
Under the terms of the Merger Agreement, Skullcandy and its representatives were permitted to initiate, solicit, facilitate and encourage inquiries from and engage in discussions with third parties relating to alternative acquisition proposals until July 23.
On June 24, 2016, Mill Road Capital Management LLC delivered an unsolicited written proposal to Skullcandy offering to acquire Skullcandy for $6.05 per share in cash, subject to numerous conditions and further negotiations. Thereafter, Mill Road entered into a confidentiality agreement with Skullcandy.
During the Go-Shop Period, Skullcandy’s representatives engaged in an active solicitation of 98 third parties, which resulted in six additional parties entering into confidentiality agreements with Skullcandy. Skullcandy and its representatives engaged in discussions with each of the seven parties that signed a confidentiality agreement and certain parties that had expressed interest in a potential transaction with Skullcandy prior to signing the Merger Agreement. Six of these parties performed due diligence on Skullcandy and several of them attended management presentations, telephonic meetings and follow-up conversations by telephone with Skullcandy and its representatives.
Starting at 12:00 a.m. (Eastern Time) on July 24, 2016, Skullcandy became subject to customary “no shop” provisions that limit its ability to solicit alternative acquisition proposals from third parties or to provide confidential information to third parties, unless the Board of Directors of Skullcandy determines that its fiduciary duties require it to do so. Prior to such time, each of the potential bidders that had signed confidentiality agreements, other than Mill Road, informed Skullcandy that it would not be submitting an acquisition proposal to Skullcandy.
On July 24, 2016, Skullcandy received an unsolicited acquisition proposal from Mill Road for $6.05 per share in cash that the Strategic Transactions Committee of the Skullcandy Board determined was reasonably likely to lead to a proposal superior to the terms of the Merger Agreement. Skullcandy therefore intends to negotiate with Mill Road in accordance with the terms of the Merger Agreement to determine whether such negotiations will lead to a superior proposal.
Subject to the terms of the Merger Agreement, Skullcandy has the right to terminate the Merger Agreement in order to accept a superior proposal. There can be no assurance that the proposal Skullcandy received from Mill Road will in fact lead ultimately to a superior proposal. The Skullcandy Board has not changed its recommendation that Skullcandy stockholders tender their shares to Parent pursuant to the transaction with Incipio, nor has it made any recommendation with respect to the Mill Road proposal.
