Craftmade Board Recommends Sale at $4.25 Per Share

October 14, 2011

Today, the Craftmade International, Inc. (CRFT.PK) Chairman of the Board, James R. Ridings, and the Chief Executive Officer, J. Marcus Scrudder, released a letter to the stockholders recommending that all stockholders accept the offer by a subsidiary of Litex Industries, Limited of $4.25 per share. The offer represented a premium of 112% over the prior days closing price of $2.00 per share and a 133% premium to the closing price just two days prior to the offer.

The offer came the same day Craftmade announced a drop in sales for its fiscal year ended June 30, 2011 of 17.5% to $127 million. The company also reported a loss of $9.6 million compared to a small net income of $61 thousand in the prior year. However, the size of the loss was dominated by a goodwill impairment charge of 9.1 million. Without the impairment to goodwill, the company would still have recorded a loss of over $500 thousand.

Litex originally made an offer of $3.25 on January 8, 2010 which was rejected by the board of Craftmade. On March 2, 2010, Litex commenced a tender offer at a cash price of $5.25 per share. When the offer expired on May 6, 2010 at total of 634,076 shares or 11% of the outstanding shares had been tendered. Litex then made an offer directly to Craftmade of $7.00 per share which was again rejected by the board. Litex again upped the ante verbally offering $7.50 per share and the board of Craftmade responded that it would only entertain discussions with Litex at a transaction price of $8.75. Litex was unwilling to pay $8.75 and withdrew its offer of $7.50 per share as it was not willing to sign a confidentiality agreement. Litex subsequently offered $8.00 and $7.50 per share, but the Craftmade Board was concerned as Litex was unable to evidence a financing commitment among other issues.

A more detailed account of these events can be found here in the letter released today by Craftmade, but it appears the long running back and forth negotiations may finally have resulted in a deal.

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