SHERMAN OAKS, Calif. — Earl Scheib Inc. has entered into a definitive merger agreement with Kelly Capital LLC, a San Diego-based private equity fund.
Kelly Capital will acquire all of the issued and outstanding shares of the common stock of Earl Scheib for $2 per share in cash. The price reflects a 567 percent premium over the last closing price of Earl Scheib’s common stock as quoted on the Pink Sheets on Feb. 18, and the transaction is valued at approximately $8 million.
Concurrent with the execution of the merger agreement, Kelly Capital paid Earl Scheib $1 million, which becomes non-refundable to Kelly Capital if Kelly should breach the merger agreement.
Earl Scheib’s board of directors unanimously approved the merger agreement and recommended its approval by company’s stockholders. Given stockholder majority approval, and the satisfaction of customary closing conditions, the transaction is expected to close by April 15. 
Earl Scheib may still consider unsolicited alternative acquisition proposals from third parties subject to compliance with specific terms set forth in the merger agreement, including, without limitation, the payment of a break up fee, the refund of the $1 million amount previously paid to Earl Scheib and expense reimbursement to Kelly Capital in the event an alternative transaction is recommended to the stockholders by the board.
According to Christian Bement, president and chief executive officer of Earl Scheib, the company began the formal process of exploring strategic alternatives with the assistance of its financial advisor in March 2008.
“The sole focus of our process was the enhancement of stockholder value,” Bement said. “This merger is the culmination of that process, in which we explored a wide range of strategic and financial alternatives. It is our firm belief that this transaction provides the best possible alternative for our stockholders, while at the same time preserving the Earl Scheib name and operation. As a company, we have always been, and will continue to be focused on serving the best interests of our stockholders. Despite the continuing unprecedented turbulent economic climate, our belief in the strength of the Earl Scheib name has never wavered. By entering into this transaction with Kelly Capital, we continue to look ahead to the future.”
