Rockford Corporation (OTC Pink: ROFO.PK) announced today that it has signed a definitive agreement under which Rockford will become a wholly owned subsidiary of Patrick Industries, Inc. by merger. Patrick Industries (NASDAQ: PATK) is a leading component solutions provider for the RV, marine, manufactured housing, and various industrial markets – including single and multi-family housing, hospitality, institutional and commercial markets. Founded in 1959, Patrick is based in Elkhart, Indiana, with over 11,000 employees across the United States.
Shares were trading for around $10 last year (very thinly traded) but popped to $15.50 with the announcement.
According to a projection in the Notice of Special Meeting, common shareholders should receive an initial payment of $16.326 and a final payment (from a holdback fund) six months later of $0.331, for a total of $16.657 in consideration.
The purchase price of the company is $125 million. The most recent annual report we have is for 2018, below. Book value at the end of 2018 was $18 million, and the company had made $7.3 million of net income that year.
In 2021, ROFO paid $1.50 per share in dividends, $2.5 in 2020, $0.75 in 2019, and $1 in 2018. With 7.25 million shares outstanding, that was a total of $41.7 million ($5.75 per share) in four years.
Interestingly, it was trading for years on end at a dividend yield north of 10%. Dividend yield can be a very good indicator. Rockford had high free cash flow conversion on its earnings, greater than 100% of net income in 2016-2018 for example, and allocated this cash flow well. They simply returned it to shareholders.
This is the Notice of Special Meeting that was sent to Rockford shareholders:
During 2021, the operating earnings of Pardee Resources Company benefited from the resilience and strength of all three of its primary markets, namely hardwood timber, metallurgical coal and natural gas. Commodity prices, which turned upward during Q4 2020, continued to improve throughout 2021, as the rebounding economy, combined with supply chain constraints, put upward pressure on prices. While the U.S. Federal Reserve is expected to increase interest rates as a means of containing overall price inflation in the economy, commodity prices remain strong as of early 2022.
The annual audit by Ernst & Young of the Company’s financial statements is expected to be completed in early April, after which we will be mailing you our 2021 Annual Report.
Your Board of Directors has voted to maintain the quarterly dividend at $1.80 per common share which will be payable March 7, 2022 to shareholders of record February 28, 2022
This is the only time we can think of that an Oddball company executive has been honored with a full New York Times obituary:
Mr. Young had a practical side as well. He made two investments in the 1970s that helped secure DuArt’s long-term future: He acquired the 12-story building in Midtown Manhattan where the laboratory had long been located, freeing it from the whims of a landlord; and he bought a two-thirds interest in a television station in Puerto Rico, which brought in a strong flow of revenue that helped improve DuArt’s bottom line. He also oversaw DuArt’s embrace of a process that benefited independent filmmakers: blowing up 16-millimeter negatives into 35-millimeter prints, which have a better chance at being commercially viable. And he added to DuArt’s photochemical film processing business by branching into film-to-video transfers and online video editing in 1970, and into digital work, including effects, titles and restorations, in 1994. But last August, Ms. Young, DuArt’s president and chief executive since 2017, announced that its business was being shuttered because it was no longer economically viable to stay independent. Its building was recently put up for sale.
DuArt Film Laboratories (DAFL) is well known by Oddball investors, although we have not mentioned it on the blog (except briefly). Nate first mentioned it in Issue 9 of the Newsletter, and we also published updates in Issues 36, 31, and 26. (The latter two are available à la carte if you are interested in giving the Newsletter a try.)