FGX International Holdings Limited Board Subject to Investigation
An investigation on behalf of current investors FGX International Holdings Limited (Public, NASDAQ:FGXI), who purchased the FGXI shares before December 16, 2009, over potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover price was announced.
The investigation by a law firm focus on potential breaches of fiduciary duty and other violations of state law by the Board of Directors of FGX International Holdings Ldt arising out of their attempt to sell FGX International Holdings Limited to a subsidiary of Essilor International of Charenton-le-Pont, France. On December 16, 2009, FGX International Holdings Limited (NASDAQ:FGXI) announced that it has signed a definitive agreement to merge with a subsidiary of Essilor International of Charenton-le-Pont, France. Under the terms of the merger agreement, which includes a termination fee of approximately $18.3 million, FGX International shareholders will receive $19.75 per share in cash upon completion of the merger, for an aggregate value of approximately $565 million, including the assumption of FGX debt of approximately $100 million. If completed, FGX International will become a wholly owned subsidiary of Essilor.
According to FGX the Boards of Directors of both companies have unanimously approved the merger agreement and FGX's principal shareholder, an affiliate of Berggruen Holdings, which owns approximately 32% of FGX's outstanding shares, and key members of FGX's senior management team have agreed to vote their shares in favor of the transaction and the merger agreement.
But according to an investigation by a law firm “the transaction appears to be unfair” to current investors of FGX International Holdings Limited (Public, NASDAQ:FGXI) because the “offer to purchase FGX International Holdings Limited (FGXI) appears opportunistically timed to take advantage of the current economic downturn” and is “grossly unfair, inadequate, and substantially below the fair or inherent value of FGXI”.
Shares of FGX International Holdings (FGXI) traded at $19.50 per share after the announcement and at about $18.35 per share the day before the announcement. FGX International Holdings Limited reported in 2007 Total Revenue of $240.46million with a Net Income of $4.71million and in 2008 Total Revenue of $256.1million with a Net Income of $17.20million
The investigation “concerns whether the FGX International Holdings Limited Board of Directors breach their fiduciary duties to FGX International Holdings Limited (FGXI) shareholders by agreeing to sell the FGXI at an unfair price thereby harming FGX International Holdings Limited and its shareholders”, “whether the directors of FGX International Holdings Limited may have breached their fiduciary duties by not acting in FGXI shareholders' best interests”, and “the Company may not have adequately shopped itself around before entering into this transaction and, pursuant to this proposed transaction, the subsidiary of Essilor International may be underpaying for FGX International Holdings Limited, thus unlawfully harming FGXI shareholders”.
FGX International Holdings Limited, loctaded on the British Virgin Islands, is a designer and marketer of non-prescription reading glasses, sunglasses and costume jewelry with a portfolio of eyewear brands, including FosterGrant and Magnivision. The Company sells its FosterGrant brand in the United States sunglasses market, and both its FosterGrant and Magnivision brands in the domestic non-prescription reading glasses market.