King Pharmaceuticals, Inc. Board Under Investors Investigation
In response to the buyout offer by Pfizer to take over King Pharmaceuticals, Inc. at $14.25 an investigation on behalf of investors of King Pharmaceuticals, Inc. (NYSE:KG) over possible breaches of fiduciary duties in connection with the proposed takeover was announced.
The investigation by a law firm concern whether King Pharmaceuticals and its Board of Directors breached their fiduciary duties owed to King Pharmaceuticals, Inc. (NYSE:KG) investors by agreeing to the current conditions of the proposed takeover by Pfizer.
On Tuesday, October 12, 2010, King Pharmaceuticals, Inc. (NYSE: KG) and Pfizer Inc.(NYSE: PFE) announced that they have entered into a merger agreement under which Pfizer will acquire King Pharmaceuticals, Inc for $3.6 billion in cash, or $14.25 per share. According to King Pharmaceuticals the offer represents a premium of approximately 40% to King Pharmaceuticals’ closing price as of October 11, 2010, and 46% percent to the one-month average closing price as of the same date.
But the investigation by a law firm questions whether the sale process and the offered price are unfair to the shareholders of King Pharmaceuticals, Inc. (NYSE:KG).
Shares of King Pharmaceuticals, Inc. (KG), which traded before the news at roughly $10.20 per share, jumped to $14.15 per share or by almost 40% in response to the takeover announcement. But King Pharmaceuticals shares traded as early as April at $12.14, in March as high as $12.54, and in January over $13 per share leaving King Pharmaceuticals investors with a meager premium. During 2007 KG shares traded as high as $21.46 per share and at least one analyst has set a price target of $15.00 per share for King Pharmaceuticals stock. In addition King Pharmaceuticals reported over the past four years steady 12months revenue ranging from $1.565billion to $2.136billion.
Therefore the investigation concerns whether the King Pharmaceuticals board of directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of King Pharmaceuticals, Inc. (NYSE:KG) and breached their fiduciary duties to King Pharmaceuticals, Inc. (NYSE:KG) shareholder by failing to adequately shop the Company before entering into the transaction with Pfizer.