Category Archives: Special Situations

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AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON JUNE 27, 2012, UNLESS THE OFFER IS EXTENDED OR WITHDRAWN (SUCH DATE, AS IT MAY BE EXTENDED, THE “EXPIRATION DATE”).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”.

—

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:

13