Tender Less than 99 shares of JAKK for $20.00 in cash. Take 20 minutes to review.
A reader kindly gave me a heads up on this odd lot tender offer from Jakks (JAKK), a retailer that wants to reduce the number of odd lot shareholders so as to lessen filing costs with the SEC.
UPDATE: REMEMBER to submit for tender by instructing your broker by June 25th, but better to alert yourself on June 24th to see where the price is trading (if above $20 then sell or hold your shares rather than submit your shares)
If you purchase 99 shares and tender them on or before the expiration date, then you will receive $20.00 per share. That works out to about a $150 profit on 99 shares. I view this simply (after reading the odd lot tender offer which takes 20 minutes) as more than a 90% probability of completion with a 10% chance of a $5 or $6 worse case share loss. 90% on $1.50 or $1.60 based on ($18.40 share price today) minus a 10% chance of -$6.00 = $0.75 EXPECTED pay-off per share on expending 99 shares times $18.40 to be paid within 3 months or a 4% EXPECTED return then annualized at 16% or (12 months/3 months waiting period) x EXPECTED return 4%). 16% beats my threshold 15% hurdle rate. Obviously, if the deal goes through then my return is a 32% annualized. I will take that risk. But I am not recommending that YOU take it. Do your own thinking.
This deal is only appropriate for small investors who value their time at about $200 per hour.
http://www.sec.gov/Archives/edgar/data/1009829/000114420412031879/v314465_ex-a1a.htm
JAKKS Pacific, Inc.
Offer to Purchase for Cash
up to 4,000,000 Shares of its Common Stock
(including Series A Junior Participating Preferred Stock Rights)
at a Purchase Price of $20.00 Per Share
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON JUNE 27, 2012, UNLESS THE OFFER IS EXTENDED OR WITHDRAWN (SUCH DATE, AS IT MAY BE EXTENDED, THE “EXPIRATION DATE”).
JAKKS Pacific, Inc., a Delaware corporation (“JAKKS,” “we” or “us”), is offering to purchase for cash up to 4,000,000 shares of its common stock, par value $0.001 per share (the “Shares”), together with the associated rights (the “Rights”) to purchase Series A Junior Participating Preferred Stock of JAKKS, par value $0.001 per share (“Series A Preferred Stock”), issued pursuant to the Rights Agreement, dated as of March 5, 2012, between JAKKS and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agreement”), at a price of $20.00 per Share, net to the seller, in cash, without interest, but subject to applicable withholding taxes (the “Purchase Price”), upon the terms and subject to the conditions described in this Offer to Purchase and in the Letter of Transmittal (which together, as they may be amended or supplemented from time to time, constitute the “Offer”).
Only Shares properly tendered in the Offer, and not properly withdrawn, will be purchased, upon the terms and subject to the conditions of the Offer. However, because of the “odd lot” priority, proration and conditional tender provisions described in this Offer to Purchase, all of the Shares tendered may not be purchased if more than the number of Shares we seek are properly tendered and not properly withdrawn. Shares tendered but not purchased pursuant to the Offer, including Shares not purchased because of proration, will be returned promptly following the Expiration Date. See, “Section 3 — Procedures for Tendering Shares” and “Section 4 — Withdrawal Rights”.
The Offer is not conditioned upon any minimum number of Shares being tendered. The Offer is, however, subject to certain terms and conditions. See, “Section 7 — Conditions to the Offer”.
The Shares are listed and traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “JAKK.” On May 24, 2012, the last full trading day prior to the announcement of the Offer, the reported closing price of the Shares on NASDAQ was $17.95 per Share. You are urged to obtain current market quotations for the Shares before deciding whether to tender your Shares pursuant to the Offer. See, “Section 8 — Price Range of Shares; Dividends; Rights Agreement”.
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What happens if more than 4,000,000 Shares are tendered in the Offer?
We will purchase properly tendered Shares in the following order of priority:
• First, we will purchase from all holders of “odd lots” of less than 100 Shares who properly tender all of their Shares and do not properly withdraw them prior to the Expiration Date;
So, how should one proceed?
1) Buy 99 shares (or fewer based on your cash availability) of JAKK. The share price was about $18 at the time of writing this post.
2) Tender all the purchased shares. Call your broker to find out how to do this and any charges associated with it. My broker InteractiveBrokers does not charge me anything for it.
3) Wait for the end of the tender (June 27, 2012) and then cash should be deposited into your account a week after that.
What also makes this interesting is Oaktree Capital Group LLC (NYSE:OAK) had offered to buy out the entire company at $20 per share (that was declined by the management). Another point,
JAKKS Market Cap is $450 million (25million shares * 18). Net Cash on balance sheet $162 million or $6.5 per share or about 33% of the market cap.
See more at: http://www.valuewalk.com/2012/05/jakk-tender-chance-for-investors-to-make-nice-profit/
7. Conditions to the Offer.
Notwithstanding any other provision of the Offer, we will not be required to accept for payment, purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of, or the purchase of and the payment for, Shares tendered, subject to the Exchange Act, if at any time on or after the commencement of the Offer and before the Expiration Date any of the following events has occurred:
| • | there shall have been instituted, or there shall be pending, or we shall have received notice of, any action, suit, proceeding, arbitration or application by any government or governmental, regulatory or administrative agency, authority or tribunal or by any other person, domestic, foreign or supranational, before any court, authority, agency, other tribunal or arbitrator that directly or indirectly (1) challenges or seeks to challenge, restrain, prohibit, delay or otherwise affect the making of the Offer, the acquisition by us of some or all of the Shares pursuant to the Offer or otherwise relates in any manner to the Offer or seeks to obtain material damages in respect of the Offer or (2) seeks to make the purchase of, or payment for, some or all of the Shares pursuant to the Offer illegal or may result in a delay in our ability to accept for payment or pay for some or all of the Shares; |
| • | our acceptance for payment, purchase or payment for any Shares tendered in the Offer shall violate or conflict with, or otherwise be contrary to, any applicable law, statute, rule, regulation, decree or order; |
| • | any action shall have been taken or any statute, rule, regulation, judgment, decree, injunction or order (preliminary, permanent or otherwise) shall have been proposed, sought, enacted, entered, promulgated, enforced or deemed to be applicable to the Offer or us or any of our subsidiaries by any court, government or governmental agency or other regulatory or administrative authority or body, domestic or foreign, which (1) indicates that any approval or other action of any such court, agency or authority may be required in connection with the Offer or the purchase of Shares thereunder or (2) is reasonably likely to make the purchase of, or payment for, some or all of the Shares pursuant to the Offer illegal or to prohibit, restrict or delay consummation of the Offer; |
| • | a general suspension of trading in, or limitation on prices for, securities on any United States national securities exchange or in the over-the-counter market, declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory, or any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that is likely, in our reasonable judgment, to materially adversely affect, the extension of credit by banks or other lending institutions in the United States; |
| • | any change in general political, market, economic, financial or industry conditions in the United States or internationally that, in our reasonable judgment, has, or could reasonably be expected to have, a material adverse effect on the business, properties, assets, liabilities, capitalization, stockholders’ equity, condition (financial or otherwise), licenses, operations, results of operations or prospects of JAKKS and its subsidiaries, taken as a whole, on the value of or trading in the Shares, on our ability to consummate the Offer or on the benefits of the Offer to us; |
| • | the commencement or escalation of war, armed hostilities or other international or national calamity, including, but not limited to, an act of terrorism, directly or indirectly involving the United States; |
13
| • | a material acceleration or worsening of events described in the preceding four conditions existing at the time of the commencement of the Offer; |
| • | a tender or exchange offer for any or all of our outstanding Shares other than the Offer, or any merger, amalgamation, acquisition, business combination, scheme of arrangement or other similar transaction with or involving us or any of our subsidiaries, shall have been proposed, announced or made by any person or entity or shall have been publicly disclosed or we shall have entered into a definitive agreement or an agreement in principle with any person with respect to a merger, amalgamation, acquisition, business combination, scheme of arrangement or other similar transaction; |
| • | any approval, permit, authorization, favorable review or consent or waiver of or filing with any domestic or foreign governmental entity or other authority or any third party consent or notice, required to be obtained or made in connection with the Offer shall not have been obtained or made on terms and conditions satisfactory to us in our reasonable judgment; |
| • | the consummation of the Offer and the purchase of the Shares pursuant to the Offer is likely, in our reasonable judgment, to cause the Shares to be (1) held of record by fewer than 300 persons, (2) delisted from NASDAQ or (3) eligible for deregistration under the Exchange Act. |
Anyone ever try this from multiple brokerages? Or multiple accounts with the same brokerage?
You can speak to your broker, but I believe that the 99 shares (less than 100) applies to a particular person or entity, so if you have several accounts at one brokerage, the shares would be aggregated. I don’t know if the company would aggregate your shares from DIFFERENT brokerages.
You have to call your brokerage and ask them to tender the shares for you (send them to the company). Most brokerage will not charge a fee for this. Some might charge $25.
Frineds and family can each purchase 99 shares. Just remember that JAKK can back out, though they wouldn’t be going through with this announcement unless they were serious about cleanng up their shareholder list.
I tried looking into this in the past. I may not be correct, but I’m pretty sure if you have the same tax ID on multiple accounts normally they would take all your tender offers from multiple accounts into consideration, putting you over the limit.
How do you tender shares? You call your broker and tell him to tender the shares?
YES.
Thanks John. I’ll check this out in the AM.
Hi John,
Just curious if we could get a list going of which brokerages charge for this. I’ve got a Merrill Edge account, they charge $30. E-Trade charges $39. I believe Fidelity also charges north of $30 (though I don’t remember the exact number). I don’t have an account at Interactive Brokers, I understand that they don’t charge.
Best,
Gary
Well, I know http://www.schwab.com does not charge. In fact, anyone should find out BEFORE buying their 99 shares since it would eat 20% of the profit.
These odd lot tenders used to be ubiquitous back several years ago as companies wanted to get out from under Sarbox
I just called TradeKing. I guess I’m the winner with a lovely $50 fee. They did say that this could be done per account however. Looks like we’re at $18.40 this morning.
Well then you may want to walk away. This example is to teach you to fish not buy a stale fish.
Certainly below $18 might make the $50 edible, but open a schwab account with $2,000 and do it.
I am now waiting for a dip. Was thinking of selling a put yesterday to recover some of it as well, but will also waste commission on selling back 1 share! I think my 20 minutes are nearly done on this one
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There are other fish in the sea. Look and you will find more. You don’t have to mess with this. I do because somehow I have to pay for the lap dances.
Quick question with these tenders, do the shares have to be settled to tender?
Good question. Check with your broker. I would think so since you must own the shares (have paid for them) to be able to tender them. I have not thought of this issue since you have time before the tender offer expires.
I believe so – generally takes only a few days to settle and you have a few weeks.
Great, thanks. I just curious because I was looking at a different situation that closes this week. Not nearly as interesting as Jakks though so I’ll have to pass on it.
There’s another tender coming up with CACC and it has oddlot priority. There are some conditions though, one is that they can walk away if the stock declines more than 10% in value so you’d probably have to wait until a date close to the deadline to see if this condition is an issue, my thought is that it most likely will be because there’s a large holder tendering a multiple of the proposed amount, so outside investors know they’ll get pro-rated unless they’re an odd-lot. But keeping it on the watchlist for an odd lot tender regardless.
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REMEMBER to submit your shares for Tender by June 24th!