There were a number of outsized gainers last week, led by Vaughan Foods after it agreed to be acquired at a huge premium to its market price.
Vaughan Foods (OTC:FOOD) jumped 275% after it agreed to be acquired for $18.25 million in cash. Reser's Fine Foods and Vaughan Foods announced that they have entered into an agreement for Reser's to acquire Vaughan Foods for $18.25 million in cash. Vaughan's Board of Directors unanimously approved the transaction, which is subject to approval from Vaughan's stockholders and other closing conditions, and is expected to close in the early fall 2011. Under the terms of the agreement, Vaughan will become a subsidiary of Reser's. Immediately following the closing, Vaughan stockholders will receive $1.58 per Vaughan share, which represents a 285% premium to the Vaughan closing stock price on May 13, 2011, the last trading day prior to the execution of the Term Sheet, when agreement was reached regarding the transaction consideration. Vaughan Foods is an integrated manufacturer and distributor of value-added, refrigerated foods.
China Auto Logistic (CALI) jumped 94% after selling stock at a 50% premium over the last market price. The company announced that it successfully closed the sale on July 1 of three million unregistered common shares to accredited individual investors at an above market price of $1.75 per share, raising a total of $5.25 million for general corporate purposes. The stock closed at $1.16 on Wednesday, the last day of trading before news of the offering was released. Mr. Tong Shiping, CEO and Chairman of the company, noted that each of the investors, in agreeing to a long term-purchase of CALI shares above their 20-day moving average price,
clearly appreciate the strength and growth potential of our company, which has been masked by the unprecedented current predicament of Chinese stocks in the U.S.
The CEO continued,
The full year sales advance in 2010 above 32%, as I had said repeatedly, was unsustainable. Nevertheless, I believe we will continue to see very healthy, world leading double digit sales in 2011 and beyond, following year-over-year growth through the first five months this year of about 4.2%, nearly 7% growth in passenger car sales, and continuing double digit growth in luxury sales.
APAC Customer Services (APAC) jumped 59% after it announced that it would be acquired by a private equity firm for $8.55 per share. The company and One Equity Partners, the private investment arm of JPMorgan Chase (JPM), announced that they have entered into a definitive merger agreement under which an affiliate of One Equity will acquire 100% of APAC, through an all-cash transaction with an aggregate equity value of approximately $470 million. APAC’s Board of Directors has unanimously approved the transaction. Under the terms of the agreement, One Equity Partners will pay APAC stockholders $8.55 per share in cash, which represents a premium of approximately 57% over APAC’s closing share price on July 6, 2011, the last trading day prior to today’s announcement. The acquisition is anticipated to be funded through committed equity and credit facilities and is not subject to any financing contingencies. The transaction is expected to close in the fourth quarter of 2011, subject to the satisfaction of customary closing conditions, including Hart-Scott-Rodino clearance and approval of APAC’s shareholders.
PMI Group (PMI) rose 36% after a positive rating adjustment from the S&P and a company announcement. On Tuesday, PMI announced that QBE Insurance Group Limited waived the right to make deductions to the value of the contingent promissory note received from QBE in connection with the 2008 sale of PMI Australia to QBE. As a result of the termination of these contingencies, PMI will be able to recognize the value of the QBE Note in its consolidated GAAP and statutory financial statements for the quarter ended June 30, 2011. The payment due date of the QBE Note remains September 30, 2011.
As the company has previously reported, PMI is required, upon receipt of payment of the QBE Note, to make a $25 million payment to PMI Mortgage Insurance ("MIC") under the terms of the agreement pursuant to which MIC assigned and transferred the QBE Note to PMI (MIC's holding company). In addition, as previously reported, upon payment of the QBE Note, PMI will be required to repay the approximately $50 million outstanding under PMI's credit facility. Following repayment of the credit facility, the company's next debt principal maturity is scheduled to occur in September 2016. The QBE Note is valued at approximately $208 million (pre-tax) at maturity.
In a separate transaction, on June 30, 2011, MIC received a $25 million profit commission from QBE relating to a reinsurance transaction between the parties.
PMI also received positive news on Wednesday after Standard & Poor's Ratings Services lessened the risk of an additional downgrade on PMI Mortgage Insurance and parent firm PMI Group, saying it expects the mortgage insurer to maintain solvency through at least the Q2 of 2012.
Fuwei Films (FFHL) climbed 33% after signing a supply letter of intent with Coca-Cola (KO). The company said that it signed a letter of intent on PETG heat shrinkable label film supply for the second half of this year with China Bottlers Procurement Consortium. China Bottlers is the authorized procurement service provider for the Coca-Cola Bottling system in China. As the leading beverage supplier in the world, Coca-Cola plans to take the lead in replacing PVC non-carbonated beverages labels with PETG films in China, starting in the second half of this year, in order to be environmentally-friendly. PETG is an improved BOPET material, which is widely used in the international label industry due to its environmentally friendly nature. According to the letter of intent, the company will supply PETG heat shrinkable label films to designated label suppliers within the Coca-Cola bottling system. Once the letter of intent is fully implemented, it is estimated that the sales of heat shrinkable label films to be supplied to Coca-Cola may account for 8-10% of Fuwei's total sales in the second half of 2011.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.