Franklin Financial Corp (NASDAQ:FRNK) Investor Files Lawsuit Over Alleged Wrongdoing In Takeover By TowneBank

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Company Name(s): 
Franklin Financial
Case Name: 
Franklin Financial Deal Case 10/03/2014
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: FRNK
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
10/03/2014
Summary: 

October 07, 2014 (Shareholders Foundation) - An investor, who currently holds shares of Franklin Financial Corp (NASDAQ:FRNK), filed a lawsuit in effort to halt the proposed takeover of Franklin Financial Corp by TowneBank for a value of approximately $23.04 per share.

The plaintiff alleges that the defendants breached their fiduciary duties owed to NASDAQ:FRNK stockholders by agreeing to sell Franklin Financial Corp too cheaply via an unfair process to TowneBank.

On July 15, 2014, TowneBank (NASDAQ: TOWN) and Franklin Financial Corporation (NASDAQ: FRNK) announced the signing of a definitive merger agreement pursuant to which TowneBank will acquire Franklin Financial Corp (NASDAQ:FRNK). Under the terms of the agreement, common shareholders of Franklin Financial Corp (NASDAQ:FRNK) will receive 1.40 shares of TowneBank common stock for each share of Franklin. This implies a deal value per NASDAQ:FRNK share of $23.04 or approximately $275 million based on TowneBank's closing stock price of $16.46 on Monday, July 14, 2014.

However, the plaintiff claims that the offer is too low and undervalues Franklin Financial Corporation. Indeed, NASDAQ:FRNK shares traded as recently as July 2, 2014, as high as $24.60 per share in the open market. In addition, Franklin Financial Corp reported that its Total Net Income rose from $1.43 million for the 12 months period that ended on Sept. 30, 2011 to $9.35 million for the 12 months period that ended on Sept. 30, 2013. Shares of Franklin Financial Corp (NASDAQ:FRNK) grew from $10.90 per share in November 2011 to as high as $24.60 per share on July 2, 2014. Furthermore, the plaintiff alleges that the process is also unfair to NASDAQ:FRNK stockholders.

On October 6, 2014, NASDAQ:FRNK shares closed at $18.80 per share.