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Mod-Pac Corp. accepted a sweetened $29.6 million buyout offer Thursday from the company’s two top executives that would take the Buffalo specialty printing company private.

The executives, CEO Daniel G. Keane and his father, Kevin, the company’s chairman, agreed to raise their offer for all of Mod-Pac’s outstanding stock to $8.40 per share in cash, a 17 percent increase over the $7.20 per share price they initially offered in late October.

While the Keanes’ initial offer was a 31 percent premium over the company’s battered share price at the time they made it, Mod-Pac’s fortunes have improved since then, with the company posting two consecutive quarters of strong profits and record sales.

That improvement, coupled with the potential takeover bid, had pushed Mod-Pac’s share price above the Keanes’ original offer, with the shares closing at $7.51 on Wednesday. The shares jumped immediately after the sweetened deal was disclosed and finished the day up by nearly 10 percent, gaining 75 cents to close at $8.26.

Mod-Pac said a committee of three independent directors had unanimously recommended that the company’s board of directors accept the sweetened acquisition offer, which is 53 percent higher than the firm’s stock price on the day before the original bid was disclosed more than five months ago.

The merger agreement also includes a provision that requires the deal to be approved by a majority of Mod-Pac’s shareholders, excluding the Keanes, who control 41 percent of the voting rights in the company through their majority ownership of a class of stock that gives them 10 votes for every share they own of that super-voting class.

Overall, the Keanes own 18.7 percent of Mod-Pac’s common stock, which has one vote per share, and nearly 52 percent of its Class B shares, which have 10 votes per share.

Edward K. Duch, a former Buffalo banking executive and Mod-Pac shareholder who now lives in Florida, said the agreement to eliminate the Keanes’ shares from the merger vote could make it more appealing for other potential suitors to consider making their own bids for the company.

“Everyone knew the Keanes controlled this deal – until today. Now that’s changed,” Duch said. “Maybe somebody may decide it’s a good time to make an offer.”

Another shareholder, Brendan J. Walsh, who had written a pair of letters to the board committee, including one this week that questioned the adequacy of the Keanes’ original offer, said he thinks the sweetened bid still falls short. “It isn’t anything to write home about,” said Walsh, who lives in Radnor, Pa. “I think that it’s still way too low.”

The Keanes, who through a spokesman declined to comment, previously have said that they plan to continue running Mod-Pac as they now do, retaining the current management team and the company’s workforce of roughly 375 employees.

Mod-Pac, which has about $59 million in sales last year, has been profitable for the last three years after a long struggle to rebuild its business following the loss of its biggest customer in the midway through the last decade.

Several Mod-Pac shareholders have been suggesting for years that the Keanes considered taking the company private because of its relative small size and their large holdings in the business, coupled with the added costs – estimated at between $500,000 to $1 million annually – of meeting the stiffer disclosure and regulatory rules that come with being a publicly traded company.

Neither the company nor the Keanes had made any substantive comments about the state of the buyout bid since October. But Mod-Pac’s financial position improved considerably since then.

Within days after the Keanes disclosed their bid, Mod-Pac reported that its business rebounded strongly over the summer, with third-quarter profits jumping by 43 percent as strong sales of its custom folding cartons propelled revenues to an all-time high. The fourth quarter was even better, with profits more than doubling to their strongest level in three years as sales hit set another record. The company is due to report its first-quarter results early next month.

“The fundamentals of the company had vastly improved,” said Christopher Carosa, of Honeoye Falls, a money manager who handles the Bullfinch Funds series of mutual funds.

M&T Bank has agreed to provide debt financing for the deal, Mod-Pac said.

email: drobinson@buffnews.com