Monday, November 29, 2021

ADDC Tender

ADDC recently put out a tender offer to buy shares for $18.25. They are trying to get above 90% ownership to move onto a short form merger, buying out everyone without a choice.

Anyone out there who owns shares please email me I am trying to figure out how many shares I know of that will not accept. I know we only have until Dec 3 so I am late with this post (family/Firebird getting in the way).

You can find the official offer and latest annual report here. Table of numbers is below

Reading the president's letter in that report, it sure seems like they are trying to scare people into selling. Given the lack of liquidity with the recent SEC rule change I can understand if people are taking the offer. But I will not tender for $18.25 as it's way too low. The stock is worth $30 at least.

Here is the offer (excuse the waviness of my phone app scan, ADDC only sends out a paper copy):

That line in there about the short form is the important part. Once they cross that threshold they can inflict a buyout at the same $18.25 price without giving shareholders a choice.

I know they want to be private and that's fine but $18.25 is not the right price. I'm willing to sell for the right price. Check these numbers and you decide.

ADDC is a little hard to value due to the minority interest in Clary Corp. Book value and comprehensive income here have accounted for the minority interest but cash has not, and I'm not certain how much cash lies with Clary. But still this looks to me like a $30 stock at least. Remember on top of this book value is the understated real estate. See my previous posts here.

Since the report date the company has bought back shares so now Book Value per share is up to $32.81.  How can $18.25 be the right price?

The Clarys have 977,067 shares = 76.6%. If they can get their minimum of 170,677 shares at $18.25 they'll have 90% and be able to take us all out at $18.25. I think the company is worth much more than that. 

disclosure: long ADDC


  1. KYZN used the circumstances related to the new SEC rule to force a buyout of shareholders, but paid a fairly good price, well above the market value. ADDC is using the same circumstances to buy out at a very low price. I agree completely with your arguments. Sorry but I sold my shares a few years ago. I imagine we will see more of this happening in the newly Expert Market stocks that are closely held by insiders. Very sad.

    1. yes the KYZN buyout has been probably the lone bright spot for me as a result of the SEC rule change.

      I agree we will likely see more of these low ball buybacks from companies since more people will feel like they have to take it due to no liquidity otherwise. sad for sure

  2. I agree that the ADDC insiders are probably trying to encourage investors to tender, but the numbers in the report do not look appealing; the company appears to have a large amount of capital which it does not earn a large profit on. If Dan really does want to get a better price, he should be ready to sue in an appraisal action in Los Angeles. Hopefully he or other dissenting shareholders live there. However, under California law, only registered shareholders can demand appraisal. So unless Dan has previously transferred his shares to direct registration, he has a problem, since the DTC charges for appraisals and does not respond promptly. At this point it is probably too late to transfer shares to direct registration before the insiders perform their short-form merger. If ADDC is not eligible for direct registration, there would be an additional charge to get a stock certificate. In general, I think anyone with shares which no longer trade thanks to the 15c2-11 amendments should transfer them to direct registration in anticipation of problems and opportunities like this; I was a shareholder of Kyzen and shifted my shares to direct registration months before the buyout, and as a consequence may have been the first outside shareholder to receive the notice by mail of the buyout. Also, shareholders should know where their companies are incorporated and have a general idea of how and where to commence appraisal actions. Dan should be ready to put his money where his mouth is, since California law says that courts can tax costs of appraisal actions as they see fit, so shareholders may have to pay if are not successful.

  3. Who tendered their DEWY? I was only able to build a small position so decided to tended at the top of the scale and waiting to see the results of the Dutch auction.

    1. I didn't tender. results were announced yesterday and they bought back almost a third of the common:

  4. After this blog post they extended the tender to December 28th

    Which is probably good news as that means they didn't get enough takers to their liking. Does anyone have info on what happened since then? What is the outcome of the tender?

    1. Yes I saw it was extended due to not getting as many shares tendered as they wanted. But I have seen no announcement about results and there was no annual meeting in Dec as there normally is.

      All I have heard is one person told me he talked with the agent and there would be no more extensions