Hancock Fabrics withdraws bid to go private

news_business_greenBy Dennis Seid

Daily Journal

BALDWYN – Hancock Fabrics’ plan to go private has been taken off the table, the company announced Monday.

The craft and fabrics retailer announced in April its desire to no longer be publicly traded.

Company officials said the costs of the conversion outweighed the benefits, and the money could be better used to improve its business. Hancock is slowly reformatting its stores, but it is a capital-intensive project for the 261-store chain.

Hancock Fabrics’ plan was to pay $1.20 per share to shareholders with less than 1,000 shares of company stock. It expected to incur a $936,000 cost for the move.

However, officials said some shareholders were splitting their shares to go below the 1,000-share threshold or buying shares through multiple accounts in order to get a pay-out.

“This activity resulted in a significant increase in the expected cost of the proposed transaction, eliminating virtually a full year of the potential expected savings that the company anticipated would have resulted from going private,” the company said.

Hancock expected to save about $640,000 annually after going private.

The proposal was scheduled to go for a vote at the company shareholders meeting Aug. 15.

But, said company president and CEO Steve Morgan, “At this time, the board feels that the expense of the transaction, due to the abuse of the multiple account purchases … has grown to a point that it now exceeds the benefits it would generate for our remaining stockholders. We look at this transaction just like any other business investment decision we would make and have decided not to proceed based on the economics at this time.”

Morgan said the company hasn’t abandoned the idea of going private or some other “alternative transaction” in the future.

But that will happen only if it becomes “economically prudent” and in the best interest of the company and its shareholders, he said.

dennis.seid@journalinc.com