This is essentially an acquisition arbitrage situation without the final completion of the acquisition. Because of the liability issue that threw a wrench into the transaction, I am assumning that the short-term target will be in the $6 to $6.50 range instead of roughly $7.25. ADG's assets will be purchased in less lhan 90 days, so I expect my exit to be triggered within a 100 days. A summary of the terms of the deal follows:

Chemring is purchasing:
• the stock of Mecar SA of Belgium for $45.81 million in cash
• the assets of Mecar USA for $13.75 million in cash plus the assumption of certain liabilities
Chemring is lending:
• Secured Promissory Note (ADG Note) of $3 million, loaned to USA, secured by the stock of USA
• Secured Promissory Note (ARC Note) of 5.2 million euros secured by the stock of Belgium
Loan Repayment Terms
• The ADG Note is due at the closing of the sale of the assets of USA, and the ARC Note is due at the sale of Belgium's stock. Both notes are due at 30 says if the sale agreement is terminated without breach by Chemring.
• Chemring will lend an additional 5.2 million euros to Belgium that will be used to repay the ARC Note, immediately prior to the closing of the Belgium sale. The effect is, the ARC Note will not be repaid by ADG or its subsidiary, ARC Europe, and the repayment will not reduce the cash consideration or the purchase price.
• The ADG note will be repaid from cash consideration payable to ADG.
Liability Concern
• $15 million from the sale ($11.5 million Mecar SA and $3.5 Mecar USA) will be placed into escrow to secure indemnification obligations from the DOJ investigation. This is a cap on potential liability.
• These obligations expire at the earlier of June 30, 2015 or a final resolution with the DOJ.
Other considerations
• A superior transaction could cost ADG $1.2 million.
• ADG will have no significant operations after the sale, and it may dissolve or engage in a business combination, or something else.
Included in the transaction:
Assets
• all accounts receivable, except pledged in factoring
• all inventory
• all fixed assets and leasehold improvements
• all leased assets
• all owned real estate
• all purchase orders and current contracts relating to future delivery of goods and services
• all deposits related to assumed contracts
• all books and records
Liabilities
• assumed contracts
• trade accounts payable
• debt supporting deposits, letters of credit and bonds
Excluded from the transaction:
Assets
• cash, excluding deposits
• prepaid items
Liabilities
• business conducted prior to closing or contracts performed prior to closing
• taxes prior to closing