Point Blank Solutions Inc. (OTC:DHBT) shares spiked nearly 20 percent earlier this week after it received an unsolicited buyout offer for $5.50 per share over a year after the company began exploring strategic alternatives. New York hedge fund Steel Partners initially approached the company two months ago but made the offer public after a lack of response from the company.

“We are confident that our proposal represents the best strategic alternative available to immediately maximize shareholder value for the Company and its public shareholders,” Warren G. Lichtenstein, Managing Member of Steel Partners stated in the letter. The hedge fund also stressed its extensive experience working with and maximizing the value of other public companies in the defense industry.

Steel Partners' offer comes just a week after its former CEO David Brooks was indicted on various fraud charges along with two other top officials. Brooks pleaded not guilty to sercurities, tax and accounting fraud charges. However, the entire ordeal has left the board in a difficult position trying to overcome the stigma associated with a criminal investigation and several arrests of key officers. This may make it difficult for management to keep the company.

Many shareholders believe, however, that Steel Partners may have to raise its offer to $6.50 to $7.00 in order to attract enough shareholders to make the deal happen. The hedge fund itself also noted that it would be willing to upwardly adjust the offer price to reflect any additional value that it may find through due diligence, so we know that such an adjustment is not out of the question.

Overall, this is great news for shareholders as it could provide them with a windfall of cash along with an escape from the criminal problems facing the company. While Point Blank has been rather keen on a turnaround, it may be difficult to convince shareholders that this turnaround is a better alternative than such a high buyout premium. Combined, these factors make DHBT a stock worth watching!

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