Associated Estates Realty Corporation (NYSE:AEC) Investor filed Lawsuit Over Alleged Breaches Of Fiduciary Duties In Acquisition

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Company Name(s): 
Associated Estates Realty
Case Name: 
Associated Estates Realty Deal Case 05/15/2015
Case Status: 
Lawsuit Filed
Affected Securities
NYSE: AEC
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
05/15/2015
Summary: 

May 19, 2015 (Shareholders Foundation) - An investor, who currently holds shares of Associated Estates Realty Corporation (NYSE:AEC), filed a lawsuit in effort to stop the proposed takeover of Associated Estates Realty Corporation by a real estate fund managed by Brookfield Asset Management.

The plaintiff alleges that the defendants breached their fiduciary duties owed to NYSE:AEC stockholders by agreeing to sell Associated Estates Realty Corporation too cheaply via an unfair process to Microchip Technology Incorporated.

On April 22, 2015, Associated Estates Realty Corporation (NYSE:AEC) announced its Board of Directors has approved a merger agreement under which a real estate fund managed by Brookfield Asset Management will acquire all outstanding shares of common stock of Associated Estates Realty Corporation (NYSE:AEC) for $28.75 per share in cash.

However, the plaintiff claims that the proposed transaction is the product of a hopelessly flawed 'process' which, to the detriment of the company’s public shareholders, was conducted at the behest of the real estate investment firm Land & Buildings, a short-term shareholder and activist investor. The plaintiff alleges that the proposed consideration NYSE:AEC shareholders will receive is grossly inadequate and undervalues Associated Estates Realty Corporation. Indeed, Associated Estates Realty Corporation reported that its annual Total Revenue rose from $149.62 million in 2011 to $194.08 million in 2014 and that its respective Net Income increased from $5.33 million to $144.71 million. Shares of Associated Estates Realty Corporation (NYSE:AEC) grew from $13.77 per share in August 2013 to as high as $26.03 per share in March 2015. In addition, the plaintiff claims that the process is also unfiar to NYSE:AEC stockholders. The plaintiff says that the merger agreement contains preclusive deal protection devices, such as a no solicitation, a four-day matching rights period, and a $60 million termination provision, that prevent other competing offers.