The Battle for Skullcandy—It’s Not Over ’Til It’s Over

Should the chief investment officer of an event-driven merger arbitrage fund take a position in Skullcandy in the midst of a takeover battle?
Donna Hitscherich  | Fall 2020
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Skullcandy, Inc announced on August 24, 2016, that it had executed a merger agreement with entities affiliated with Mill Road Capital Management LLC (Mill Road), a private investment firm focused on investing and partnering with publicly traded micro-cap companies, to acquire Skullcandy for $6.35 per share in cash. It appeared that Mill Road emerged as the winner in a hotly contested summer-long takeover battle for Skullcandy. While the premium offered by Mill Road seemed healthy, it was only four years prior to that, in July 2012, that Skullcandy had gone public at $20 a share. Bobbie Cavalier, the chief investment officer of an event-driven merger arbitrage fund considered taking a position in Skullcandy as she assessed two possible sources of additional value that might make it worthwhile for her company to take a position in Skullcandy: the potential for an increased bid price or whether the bids fully valued Skullcandy’s 2011 acquisition of Astro Gaming. In this case, students are asked to assess the potential value of Skullcandy shares and recommend whether it is an attractive investment.

Case ID: 210302

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