Del Monte Foods Company Investors File Lawsuits Against Going Private Offer
OCTOBER 2011 - According to the Notice:
REASONS FOR THE SETTLEMENT
Lead Plaintiff and Co-Lead Counsel have reviewed and analyzed the facts and circumstances relating to the claims asserted in the Action, as known by Lead Plaintiff to date. Co-Lead Counsel has reviewed over 900,000 pages of documents, has taken seven depositions (including one member of the Board, one member of Del Monte senior management, two representatives of Barclays, one representative of Perella and one representative of KKR and Vestar, respectively), and has fully briefed and argued a motion for a preliminary injunction. Co-Lead Counsel believe that they have received sufficient information to evaluate the merits of the proposed Settlement. Co-Lead Counsel have analyzed the evidence adduced during their investigation and during two phases of discovery conducted both before and after the hearing on Lead Plaintiff’s motion for a preliminary injunction and have researched the applicable law with
respect to the claims of Lead Plaintiff and the Settlement Class against Defendants and the potential defenses thereto. Based on this investigation and substantial discovery, Lead Plaintiff has decided to enter into the Stipulation and settle the Action, after taking into account, among other things, (1) the substantial benefits to members of the Settlement Class from the litigation of the Action and the Settlement; (2) the risks of continued litigation in the Action; and (3) the conclusion reached by Lead Plaintiff and Co-Lead Counsel that the Settlement upon the terms and provisions set forth in the Stipulation is fair, reasonable, adequate, and in the best interests of the Settlement Class and will result in a material benefit to them.
The entry by Lead Plaintiffs and Defendants into the Stipulation is not an admission as to the merit or lack of merit of any claims or defenses asserted in the Action.
Each Party denies any and all allegations of wrongdoing, fault, liability, or damage in the Action. The Parties covenant and agree that neither the Stipulation, nor the fact or any terms of the Settlement, or any communications relating thereto, is evidence, or an admission or concession by any Party or their counsel, Class Member, or any other Released Defendant Party or Released Plaintiff Party, of any fault, liability, or wrongdoing whatsoever, as to any facts or claims alleged or asserted in the Action, or any other actions or proceedings, or as to the validity or merit of any of the claims or defenses alleged or asserted in any such action or
proceeding. The Stipulation is not a finding or evidence of the validity or invalidity of any claims or defenses in the Action, any wrongdoing by any Party, Class Member, or other Released Defendant Party or Released Plaintiff Party, or any damages or injury to any Party, Class Member, or other Released Defendant Party or Released Plaintiff Party. Neither the Stipulation, nor any of the terms and provisions of the Stipulation, nor any of the negotiations or proceedings in connection therewith, nor any of the documents or statements referred to herein or therein, nor the Settlement, nor the fact of the Settlement, nor the Settlement proceedings, nor any statements in connection therewith, (a) shall (i) be argued to be, used, or construed as, offered or received in evidence as, or otherwise constitute an admission, concession, presumption, proof, evidence, or a finding of any liability, fault, wrongdoing, injury, or damages, or of any wrongful conduct, acts, or omissions on the part of any of the Released Defendant Parties or Released Plaintiff Parties, or of any infirmity of any defense, or of any damage to Lead Plaintiff or any other Class Member, or (ii) otherwise be used to create or give rise to any inference or presumption against any of the Released Defendant Parties or Released Plaintiff Parties concerning any fact or any purported liability, fault, or wrongdoing of the Released Defendant Parties or Released Plaintiff Parties or any injury or damages to any person or entity, or (b) shall otherwise be admissible, referred to, or used in any proceeding of any nature, for any purpose whatsoever; provided, however, that the Stipulation, Judgment, and/or Alternative Judgment may be introduced in any proceeding, whether in the Court or otherwise, as may be necessary to argue and establish that the Stipulation, Judgment, and/or Alternative Judgment has res judicata, collateral estoppel, or other issue or claim preclusion effect or to otherwise consummate or enforce the Settlement, Judgment, and/or Alternative Judgment or to secure any insurance rights or
proceeds of any of the Released Defendant Parties or Released Plaintiff Parties or as otherwise required by law.
THE BENEFITS OF THE SETTLEMENT
In consideration of the Settlement, Defendants have agreed to cause the sum of $89,400,000 (the “Settlement Amount”) to be paid for the benefit of the Settlement Class. Del Monte shall fund sixty five million seven hundred thousand dollars ($65,700,000) of the Settlement Amount in cash, which shall include the payment by Del Monte of certain amounts previously withheld at Closing, and Barclays shall fund twenty three million seven hundred thousand dollars ($23,700,000) of the Settlement Amount in cash.
DECEMBER 2010 - At least four investors in Del Monte Foods shares filed four lawsuits in State Court against directors of Del Monte Foods alleging breaches of fiduciary duties arising out of their attempt to sell Del Monte Foods Company via an unfair price through a process.
According to the complaints all plaintiffs allege that the defendants breached their fiduciary duties owed to Del Monte Foods Company (NYSE:DLM) investors in connection with the proposed takeover.
On Thursday, November 25, 2010, Del Monte Foods Company (NYSE: DLM) and an investor group led by funds affiliated with Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners and Centerview Partners announced that they have signed an agreement under which the investor group plans to acquire Del Monte for $19.00 per share in cash. The transaction is valued at approximately $5.3 billion, including the assumption of approximately $1.3 billion in net debt. Del Monte Foods Company said the price represents a premium of approximately 40 percent over Del Monte's average closing share price during the past three months prior to November 18, 2010, when market rumors of a transaction began, and is also higher than any price the Company's stock has ever achieved.
But plaintiffs say the $19 offer significantly undervalues Del Monte Foods and the offer represents just a 5% premium to Del Monte Foods’ closing price on November 24, 2010, the last full trading day before the announcement and a mere 15% premium to Del Monte Foods stock price during June. At least one analyst has set a price target of $22.00 per share for Del Monte stock. In addition Del Monte Foods has performed well for its shareholders, Del Monte’s 52week Total Revenue went from $2.8725billion to $3.7398billion over the past four filing periods. Its Net Income went over the same period from $112.60million to $244.3million.
In addition plaintiffs claim the process is unfair, since certain executives and insiders will receive additional special payments for themselves while ignoring the interests of the shareholders in maximizing the price the shareholders will receive and certain Del Monte Foods officers and directors are beneficial owners of an illiquid block of over 9.5million shares of Del Monte Foods stock and thus stand to gain $180million from the proposed buyout. Further, so the plaintiffs, while the merger agreement permits Del Monte Foods to shop itself for 45 days after Nov. 25, that provision appears to be meaningless in light of the deal protection devices in the merger agreement, such as, a no shop clause after the 45days, a matching rights provision, and a $60 to $249million termination and $15million expense fee provision.