Retail Ventures, Inc. Investor Investigation Over Possible Breaches Of Fiduciary Duties
The proposed buyout of Retail Ventures, Inc. triggered an investigation for investors in Retail Ventures, Inc. (Public, NYSE:RVI) shares questioning the potential unfairness of the deal and possible breaches of fiduciary duties by certain Retail Ventures officers and directors.
The investigation by a law firm concerns possible breaches of fiduciary duties by certain officers and directors at Retail Ventures, Inc. arising out of their attempt to sell Retail Ventures to DSW Inc.
On Tuesday, Feb 8, 2011, DSW Inc. (NYSE: DSW) and its largest shareholder, Retail Ventures, Inc. (NYSE: RVI) announced that the two companies have signed a merger agreement providing for RVI Ventures, Inc. to become a wholly-owned subsidiary of DSW INc. in a tax-free exchange of shares at an exchange ratio of 0.435 DSW shares per each RVI share. Under the terms of the current agreement, shares of Retail Ventures will convert into Class A DSW common shares at an exchange ratio of 0.435 DSW shares per each Retail Venture share, unless the holder properly and timely elects to receive a like amount of DSW Class B common shares in lieu of DSW Class A common shares. The voting rights associated with the two classes of shares will be the same as the currently outstanding Class A common shares (one vote) and Class B common shares (eight votes) of DSW.
Based on a closing price of $36.23 per DSW share on Feb 8, the offer implies a value of $15.76 per RVI share. Based on a stock price of as high as $42.83 per DSW share during Wednesdays trading, the offer implies a value of $18.63 per share.
Share of Retail Ventures, Inc. (NYSE:RVI) increased in response to the takeover announcement from $15.54 per share on Tuesday to as high as $18.45 per share. Retail Ventures posted net sales of $489.3 million, up from $444.6 million for the prior year quarter, and a profit of $7.9 million compared to a loss of $3.9 million in the prior year quarter. In addition Retail Ventures’ 52/53week Total Revenue increased from $1.279billion to $1.602billion.
Therefore the investigation concerns whether Retail Ventures Board of Directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of Retail Ventures, Inc. (NYSE:RVI) and specifically breached their fiduciary duties to Retail Ventures (RVI) shareholder by failing to adequately shop the Company before entering into this transaction. A potential class action lawsuit would seek to maximize the amount of money and information RVI shareholders would receive in a buyout, so the law firm.