Cornell Companies, Inc. Board Faces Investigation on Behalf of CRN Investors

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Company Name(s): 
Cornell Companies
Affected Securities: 
NYSE: CRN

Just hours after the takeover announcement several investigations on behalf of current investors in Cornell Companies, Inc. (NYSE:CRN) concerning shareholder claims over possible breaches of fiduciary duty by the board of directors of Cornell Companies were announced.

The investigation by law firm focuses on potential breaches of fiduciary duty and other violations of state law by the Board of Directors of Cornell Companies of arising out of their attempt to sell Cornell Companies, Inc. (NYSE:CRN) to the GEO Group. Cornell Companies, Inc., located in Houston, Texas, is a provider of correctional, detention, educational, rehabilitation and treatment services outsourced by federal, state, county and local government agencies for adults and juveniles. Cornell Companies, Inc. reported in 2007 Total Revenue of $360.60million, in 2008, $386.72million, and in 2009 $412.38million.

On April 19, 2010, Cornell Companies (NYSE:CRN) and the GEO Group (NYSE:GEO) announced a merger agreement pursuant to which The GEO Group will acquire Cornell Companies for stock and/or cash at an estimated enterprise value of $685 million based on the closing prices of both companies' stocks on April 16, 2010, including the assumption of approximately $300 million in Cornell debt, excluding cash. Under the terms of the definitive agreement, stockholders of Cornell will a value of approximately $24.96 per Cornell (CRN) share. According to Cornell Companies the Boards of Directors have approved the merger agreement and the offer represents a 35 percent premium over the closing price of Cornell's stock (CRN) on April 16, 2010.

Shares of Cornell Companies, Inc. (CRN) traded after the takeover announcement at $24.74 per share, and at $18.62 per share the trading day before the news. CRN shares were down from its 52weekHigh of $25.13 per share, and from $27.71 per share in 2008. At least one analyst set a price target for Cornell stock at $29.00 per share.

The investigation by a law firm “concerns whether the Cornell Companies Board of Directors breached their fiduciary duties to Cornell Companies, Inc. (NYSE:CRN) stockholders by failing to adequately shop the Company prior to entering into the agreement, whether the Board of Directors breached their fiduciary duties by not seeking a deal that would provide better value of Cornell Companies, Inc. (CRN), and whether the GEO Group is underpaying for Cornell Companies (CRN), thus unlawfully harming Cornell Companies, Inc. stockholders.”