Silverleaf Resorts, Inc. Investor Files Lawsuit Against Takeover

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Company Name(s): 
Silverleaf Resorts
Case Name: 
Silverleaf Resorts Deal Case 02/28/2011
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: SVLF
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
02/28/2011
Class Period End: 
02/02/2011
Summary: 

An investor in shares of Silverleaf Resorts, Inc. has filed a lawsuit against members of the board of directors of Silverleaf Resorts for allegedly attempting to sell Silverleaf Resorts too cheaply through an unfair process.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties out of their attempt to sell Silverleaf Resorts to an Affiliate of Cerberus Capital Management L.P.

On Thursday, Feb 3, 2011, Silverleaf Resorts, Inc. (NASDAQ: SVLF) announced that it has entered into an agreement to be acquired by SL Resort Holdings Inc., an affiliate of Cerberus Capital Management, L.P. Under the terms of the proposed agreement, Silverleaf Resorts, Inc shareholders will receive, at the closing, $2.50 in cash for each share of Silverleaf Resorts, Inc common stock (SVLF) they own. Silverleaf Resorts said the offer represents a premium of approximately 75% based on the closing trading price of $1.43 of Silverleaf common stock on February 3, 2011.
In fact in response to the takeover news shares of Silverleaf Resorts, Inc. (Public, NASDAQ:SVLF) rose from $1.50 days before the announcement to $2.45 per share.

But the plaintiff alleges that the deal blatantly and significantly undervalues Silverleaf shares. In fact at least one analyst has set a target price of $5.00 for Silverleaf Resorts, Inc. (NASDAQ: SVLF) shares and the book value of Silverleaf Resorts shares is $5.47 per share. In addition the performance of Silverleaf Resorts, Inc over the past years was consistent. Silverleaf Resorts reported between 2006 and 2009 steady 12months Total Revenue ranging from $206.88million to $263.96million. Additionally The Chairman of the Board of Directors and CEO of Silverleaf Resorts Robert E. Mead has already entered into a Voting Agreement with Cerberus Capital Management, L.P. pursuant to which he has agreed to vote shares beneficially owned by him representing 24.5% of the outstanding shares of Silverleaf Resorts, Inc in favor of the proposed transaction.