District Court Grants Preliminary Approval of Settlement in Merger Case

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The US District Court for the Western District of Pennsylvania recently granted preliminary approval to settle a merger suit in which Michael Baker Corp. (Baker) shareholders alleged that the $397 million purchase price that Integrated Missions Solutions, Inc. (IMS) paid for Baker was “grossly inadequate.”

Baker announced in late July 2013 that it had entered into a definitive merger agreement with IMS (with the per-share purchase price representing not less than a 37 percent premium). The merger was to be accomplished following a cash tender offer by an IMS subsidiary to acquire all of Baker’s outstanding shares.  

Soon thereafter, plaintiffs sent demand letters to Baker’s Board of Directors (Board). Baker established a special litigation committee (SLC) in late August 2013, and filed a Schedule 14D-9 in support of the tender offer in early September 2013. During its investigation, the SLC shared with plaintiffs over 5,400 pages of non-public, internal information concerning the IMS deal. 

After reviewing the materials provided, plaintiffs and their counsel made a written demand for action, met with counsel for Baker’s Board and SLC, and ultimately commenced this action on September 24, 2013. Plaintiffs alleged, under federal securities law and Pennsylvania law, that Baker and its directors had breached their fiduciary duties by seeking to sell Baker through an “unfair process, for an inadequate price and on unfair terms, and that [they] failed to provide material information and/or omitted material information from the Schedule 14D-9.” 

On October 1, 2013, Baker filed additional disclosures in a Supplemental 14D-9, and when the merger closed on October 11, 2013, the parties entered a memorandum of understanding. After reviewing the SLC’s report, plaintiffs and counsel determined that no further investigation was necessary, and the parties entered into a stipulation of settlement in late December 2013. 

Under the proposed settlement, Baker denies any wrongdoing and acknowledges that plaintiffs’ actions caused Baker to release additional disclosures concerning the merger with IMS. Baker will pay up to $365,000 for plaintiffs’ attorneys’ fees and costs.   

Bisch v. Bontempo et al., Case No. 13-cv-1392 (W.D. Pa. Mar. 3, 2014).

Topics:  Mergers, Purchase Price, Settlement

Published In: Business Organization Updates, Mergers & Acquisitions Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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