Shareholder Files Class Action Against Skullcandy Over Incipio Deal

A class action complaint on behalf of Skullcandy shareholders was filed in U.S. District Court in Salt Lake City July 19 alleging the Skullcandy board misled shareholders about a proposed buyout by Incipio, announced June 23. Under the proposed transaction, Incipio would acquire all outstanding shares of Skullcandy for $5.75 per share in an all-cash tender offer. The complaint (in Pacer), brought by shareholder Rose Paprakis, alleges the Incipio offer is inadequate in light of the company’s recent financial performance and growth prospects and is a 29.2 percent discount to the company’s 52-week high closing stock price, said Paprakis’ law firm Faruqi & Faruqi in a news release Monday. The suit said Skullcandy CEO Hoby Darling, Chairman Doug Collier, General Manager-Global Women's Division Heidi O’Neil, Executive Director Rick Alden, Chief Financial Officer Jason Hodell and board members Jeff Kearl, Scott Olivet and Greg Warnock “forced through a sale of the Company in order to reap personal benefits they negotiated with the Buyer to the detriment of Skullcandy’s public stockholders.” The board "pushed through" the transaction in which Incipio planned to acquire 100 percent of outstanding Skullcandy shares in a cash offer for about $177 million followed by a “second-step merger,” the complaint said. The suit alleged the board didn’t make public the revenue, operating profit and net income contributed by Astro Gaming, which Skullcandy acquired in 2011 for $10.2 million, and the plaintiff maintains is worth at least $70 million. On Friday, Skullcandy said in a news release that after consultation with legal counsel and financial advisers, a proposal from Mill Road Capital Management for $6.05 per share in cash constituted a "Superior Proposal," as defined in its definitive merger agreement with Incipio. Skullcandy delivered notice to Incipio Thursday of the board’s intent to change its recommendation and terminate the Incipio agreement. Incipio had until 11:59 p.m. Tuesday to make proposals to and negotiate with Skullcandy, it said. Skullcandy didn’t comment Tuesday.