Hancock Fabrics (HKFI) – Going Private Transaction – $200 Gain – Cancelled

Current Price – $1.0

Offer Price – $1.2

Upside – 20% or $200 for Odd Lot holders

Expiration date – not announced yet

SEC Filling

Trading Strategy:

Buy 999 shares of HKFI and wait for reverse-split after the shareholder meeting.

Summary:

After careful consideration, our Board of Directors has concluded that the costs associated with being a public reporting company in the U.S. are not justified by the benefits. The primary purpose of the going private transaction is to reduce the number of record holders of the Company’s common stock, par value $0.01 per share to fewer than 300 allowing the Company to deregister its Common Stock.

To accomplish the reduction in the number of record holders of the Common Stock, the Company will effect a reverse stock split of the Common Stock, whereby each 1,000 shares of Common Stock outstanding as of the effective date of the reverse stock split will be converted into one whole share of Common Stock (the “Reverse Stock Split”). In lieu of issuing any fractional shares held by stockholders as a result of the Reverse Stock Split, the Company will make a cash payment equal to $1.20 (the “Cash Payment”). Accordingly, stockholders owning fewer than 1,000 pre-Reverse Stock Split shares will have no further interest in the Company, no longer be stockholders of the Company and will be entitled to receive only the Cash Payment multiplied by the number of pre-Reverse Stock Split shares owned by them. 

Shareholder Approval:

The deal is subject to shareholder approval of the 15th of August 2014.

Source of Funds:

Based on estimates of the record ownership of our Common Stock, the number of our Common Stock outstanding and other information as of April, 24, 2014, and assuming that approximately 21,621,000 pre-Reverse Stock Split shares of our Common Stock are cancelled in the Reverse Stock Split, the Company estimates that the total funds required to consummate the Transaction will be approximately $1,266,000. 

Final costs of the Transaction may be more or less than the estimates shown above. The Company expects to pay the costs of the Transaction, including the amounts to be paid to stockholders for their fractional shares, out of funds available.