COPPELL, Texas, June 23 /PRNewswire-FirstCall/ -- Craftmade International, Inc. (OTCQX: CRFT) ("Craftmade" or the "Company") today sent a letter to its stockholders commenting on recent developments relating to Litex Industries, Limited. The letter describes the most recent unsolicited and highly conditional proposal by Litex to acquire Craftmade. The text of Craftmade's letter to its stockholders is set forth below.
Dear Fellow Stockholder:
We're writing to update you regarding recent developments with respect to Litex Industries, Limited. By way of background, Litex made an unsolicited offer in January to acquire Craftmade for $3.25 per share. At that time, Litex created a lot of distraction by stating that it was buying Craftmade when there was no such agreement. Seven weeks after that announcement, Litex launched a hostile tender offer to acquire your shares for $5.25 per share, which Litex stated was a "full and fair" price. That offer was rejected by the vast majority of our stockholders.
Shortly before the expiration of the $5.25 tender offer, Litex indicated to us that it may be willing to offer in excess of $7.00 per share. After serious consideration the Board responded that the proposal was still not one that the Board could support, but proposed that once the open tender offer expired both companies sign a confidentiality agreement that would allow Craftmade to provide Litex confidential information that we believed would help Litex better understand the intrinsic value of the Company. Ultimately, Litex was not willing to agree to the terms of a confidentiality agreement.
Not having reached an agreement that would allow Craftmade to securely share confidential information with a competitor, Litex proceeded to make a verbal offer to the Company to purchase the stock at $7.50 per share. Our directors met to discuss the $7.50 proposal and authorized our financial advisor to inform Litex that although the Board had not made a determination to sell the Company, Craftmade would entertain discussions with Litex regarding a potential transaction at a price of $8.75 per share. Craftmade also requested that such proposal be put in writing by Litex, and include a list of the major conditions to the transaction and be accompanied with a form of acquisition agreement so the Board could understand the terms and conditions of the transaction to determine how to appropriately respond. Subsequently, Litex advised us that (i) it was not prepared to pay $8.75 per share for Craftmade's stock, (ii) would not sign a proposed confidentiality agreement and (iii) withdrew its $7.50 per share proposal.
Since that time, we understand that Litex has purchased shares from a stockholder at $7.50 per share in a non-public transaction, to bring Litex's ownership of Craftmade to a little under 15%. We've also been told that Litex has discussed purchasing shares from some of you at prices as high as $8.75 per share (the same price Litex said it was not willing to pay all stockholders).
Most recently, on June 21, 2010, Craftmade received a letter from Litex with an unsolicited proposal to acquire Craftmade at a price of $8.00 per share. Once again, we did not receive a form of acquisition agreement, or any indication of acceptance of basic confidentiality agreement terms. The letter did include some of the conditions that the Company was required to meet. Some of these conditions were normal and reasonable for such a transaction; however, some of the conditions to the proposal are simply not within Craftmade's control to be satisfied nor are they customary and reasonable. For example, Litex's proposal requires that Craftmade eliminate the "change in control" provisions contained in its bank financing agreement, which can only be eliminated by our bank. It is also worth noting that Litex had previously characterized such provisions as "customary." Litex has also requested that the Company not honor certain contractual agreements it has made with key personnel. As part of this most recent offer, Litex also informed us that it would be announcing the offer this week at the upcoming Dallas International Lighting Market.
Following a meeting to review this proposal, Craftmade's Board instructed its financial advisor to clarify certain aspects of the proposal and to inform Litex that any proposal could not contain conditions beyond the control of the Company and that Litex would have to sign a satisfactory confidentiality agreement in order to receive non-public information. As of the date of this letter, the Company has not received a revised proposal.
While this latest offer brings Litex closer to the intrinsic value of the Company, we ultimately think it is a disingenuous effort, as it contains conditions that clearly cannot be controlled by the Board and offers no path forward on such basic issues as a confidentiality agreement to allow the exchange of sensitive, non-public information or a form of acquisition agreement that would elaborate on other critical terms related to a possible transaction. Additionally Litex's attempt to pressure the Company into making a quick decision prior to a public announcement on its part is the same tactic used prior to the lighting market in January, which was clearly unsuccessful and counter productive.
Craftmade is experiencing improved business results that give us optimism for the coming year. Our past two quarters have shown significant improvement over last year, and in our most recent fiscal quarter ended March 31, 2010, Craftmade achieved its best financial performance in almost three years, excluding expenses related to the Litex tender offer.
Your Board and Management team have put tremendous time and effort into trying to determine if there is a path forward with Litex, and have been repeatedly stymied in our efforts. We cannot accept this current proposal given its unworkable terms and our understanding that Litex has discussed paying a considerably higher price, but not to all stockholders. Should Litex decide to pursue another tender offer, the Board will give it appropriate consideration, as undoubtedly will the other stockholders of the Company. Otherwise we remain prepared to entertain any serious offers from Litex or others, and will continue to work to maximize value for our stockholders.
James R. Ridings
J. Marcus Scrudder
Chairman of the Board of Directors
Chief Executive Officer
Craftmade International, Inc.
Craftmade International, Inc.
This letter contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include, but are not limited to, (i) statements concerning future financial condition and operations, including future cash flows, revenues, gross margins, earnings and variations in quarterly results, (ii) statements relating to future performance and stock price and (iii) other statements identified by words such as "may," "will," "should," "could," "might," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "forecasts," "intends," "potential," "continue," and similar words or phrases. All forward-looking statements are based on current expectations regarding important risk factors and should not be regarded as a representation by us or any other person that the results expressed therein will be achieved. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement can be found in the risk factors section of our Annual Report on Form 10-K for the fiscal year ended June 30, 2009, filed with the SEC on September 28, 2009.
Founded in 1985, Craftmade is engaged in the design, manufacturing, distribution, and marketing of a broad range of home decor products, including proprietary ceiling fans, lighting products, and outdoor furniture. The Company distributes its premium products through a network of independent showrooms and mass retail customers through its headquarters and distribution facility in Coppell, Texas and manufacturing plant in Owosso, Michigan. More information about Craftmade can be found at www.craftmade.com.
SOURCE Craftmade International, Inc.