A shareholder in a Michigan color products business has filed a class-action lawsuit aimed at stopping the company's sale. The lawsuit alleges that the company's board of directors and executives would gain financial benefits from the sale not available to most shareholders.
In April, company officials said that 68 percent of the shareholders voted to sell the company for $625 million in a tender offer. The 23-page lawsuit alleges that the board did not fulfill its duty to get the most profit for shareholders.
Under the deal, common stock shareholders will receive $5.55 per share. That price was 39 percent over the closing price on April 10, but just a few weeks later, it closed at $5.54. According to the lawsuit, the offer per share is too low based on the company's prospect for earnings in the future.
The company has bucked the economic downturn recently. It showed a profit of nearly $45 million in the fourth quarter of 2011, which proved the most profitable year in six years.
The case is asking for an end to the sale or a modification to provide better prices per share for shareholders.
The suit contends that the corporate board of directors would receive "golden parachute" funds and receive cash for stock the members own. The lawsuit states, for example, that the company's chief executive officer would gain $4.2 million in cash and benefits should the company change hands.
A trio of equity investors owns 68 percent of the company and fills a variety of both advisory and voting positions. The lawsuit also alleges that the financial adviser to the board has a conflict of interest because of his ties to the one of the large investors.
Shareholders in companies are wise to review financial filings and documents and to remain aware of transactions that could affect stock value.
Source: MLive, "X-Rite shareholder files class action lawsuit over $625 million takeover bid by Danaher Corp.," Garret Ellison, April 30, 2012
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