Rockford Corporation Has Its "One-Day" $ROFO

This press release was published on Thursday:
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.

Rofo 2018 Ar by Nate Tobik on Scribd

This is the Notice of Special Meeting that was sent to Rockford shareholders:

Rockford Corporation - Notice of Special Meeting by Nate Tobik on Scribd

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