Tuesday, February 17, 2009

KATY Industries ARBITRAGE OPPORTUNITY

Katy Industries (OTC:KATY), maker of cleaning products, filed a definitive proxy today proposing a vote of shareholders. The intent will be in effecting a reverse stock split in order to take the company private. All shareholders holding under 500 shares will be cashed out at $2.00 per share at the closure of the transaction. The equity is currently trading at $1.15 in the marketplace.

In order for the reverse split to go through it must be approved by the shareholders. The board of directors owns approximately 40% of the company and they will vote all their shares in favor of the transaction. Therefore, it can be hypothesized that approval is quite likely.

A purchase of the shares right now, if the transaction is completed will result in a 76% return over 1 month. This is equivalent to 766% annualized return. Since the mathematical probability of the transaction completing is so high, this is virtually a riskless proposition.

The goal here for the company is to reduce filing expenses associated with a public company, especially the Sarbanes-Oxley related auditing costs.

Read more about the transaction in their definitive proxy: Definitive Proxy Solicitation Materials - Going Private Transaction

The vote date is set at March 19th, 2009.

Disclosure: I own shares of NTEC.

SG

1 comment:

  1. BRIDGETON, Mo., March 12 /PRNewswire-FirstCall/ -- Katy Industries, Inc. ("Katy" or the "Company") (OTC Bulletin Board: KATY) announced today that its Board of Directors has determined that the proposal to amend the Company's Certificate of Incorporation to change the number of issued and outstanding shares of Katy by effecting a 1-for-500 reverse stock split with cash paid in lieu of resulting fractional shares (the "Reverse Stock Split") was no longer in the best interests of the Company. This decision was due primarily to a change in the number of shares to be exchanged for cash in the Reverse Stock Split, which resulted in a substantial increase in the cost and expense of the Reverse Stock Split as compared to what was originally anticipated. As a result, the Board of Directors has decided to abandon the Reverse Stock Split and to cancel the Special Meeting of Stockholders of the Company scheduled for March 19, 2009. The Company will continue its current operations and will continue to be subject to the reporting requirements of the Securities and Exchange Commission.

    Company contact:
    Katy Industries, Inc.
    James W. Shaffer
    (314) 656-4388

    ReplyDelete

 
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