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TheStreet Open House

Acquisition Of Kaydon Corporation By AB SKF May Not Be In The Best Interests Of Kaydon Corporation Shareholders

Stocks in this article: KDN

SAN DIEGO and ANN ARBOR, Mich., Sept. 5, 2013 /PRNewswire/ --  Shareholder rights attorneys at Robbins Arroyo LLP are investigating the acquisition of Kaydon Corporation (NYSE: KDN) ("Kaydon") by AB SKF ("SKF").  On September 5, 2013, the two companies announced the signing of a definitive merger agreement under which SKF will acquire Kaydon for $35.50 in an all-cash tender offer.  The transaction is expected to close in the fourth quarter of 2013.

(Logo: http://photos.prnewswire.com/prnh/20130103/MM36754LOGO)

Is the Merger Best for Kaydon and Its Shareholders?

Robbins Arroyo LLP's investigation focuses on whether the board of directors at Kaydon is undertaking a fair process to obtain maximum value and adequately compensate its shareholders in the merger.  As an initial matter, the $35.50 consideration represents a premium of only 22% based on the Kaydon's closing price on September 4, 2013.  That premium is substantially below the average one-day premium of 37.45% for comparable transactions in the last five years. 

On July 25, 2013, Kaydon issued a press release announcing the company's operating results for its second quarter 2013, reporting increases in orders and adjusted gross margins.  Specifically, Kaydon reported an increase in orders to $123.2 million in the second quarter, compared to $112.8 million for the same period 2012.  The company also reported an increase in adjusted gross margin to 38.6%, compared to 33.7% for the same period 2012.  Further, Kaydon beat analysts' predictions for earnings per share and net income in each of the last four quarters.  In announcing these results, James 'O'Leary, Kaydon's Chairman and Chief Executive Officer commented, "The second quarter of 2013 was solid as we continue to successfully manage the variables within our control.  Relative to the comparable quarter of 2012, we saw improved margins, free cash flow and orders despite a still challenging economic environment. In aggregate, bookings for our industrial businesses were solid with trends consistent with this year's first quarter."

Given these facts, Robbins Arroyo is examining Kaydon's board of directors' decision to sell the company to SKF now rather than allow shareholders to continue to participate in the company's continued success and future growth prospects, and whether they are seeking to benefit themselves.  

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