Wednesday, December 21, 2011

Morton's Investor Says $117M Fertitta Deal Doesn't Cut It

DECEMBER 21, 2011

Morton's Investor Says $117M Fertitta Deal Doesn't Cut It
By Lance Duroni
Law360, Wilmington (December 20, 2011, 9:32 PM ET) -- A Morton's Restaurant Group Inc. shareholder launched a class action Monday in Delaware challenging restaurant magnate Tilman Fertitta's $117 million bid for the steakhouse chain, claiming the deal shortchanges investors.
Fertitta, the owner of Houston-based restaurant and hospitality giant Landry's Restaurants Inc., announced Friday that Morton's board had agreed to the $6.90-per-share deal, which boasts a 34 percent premium.
But Morton's shareholder Lon Myers calls the price "grossly unfair and inadequate" in a complaint filed in Delaware court, claiming Morton's board members breached their fiduciary duty to shareholders by signing off on the deal.
The offer neglects to factor in synergies created through the merger and the company's generally rosy financial prospects, according to the suit.
"[W]hile Fertitta will benefit from cost savings and synergies in the proposed transaction, the Morton's shareholders are left without adequate consideration," Myers said.
To support his claim that the deal undervalues Morton's, the plaintiff cites revenue increases at the company of 5 to 10 percent for each quarter of 2011 over the same quarters in 2010, along with one independent Wall Street analysis that suggested a $9-per-share price target for Morton's.
"The proposed transaction is wrongful, unfair and harmful to Morton's public shareholders because they will not be able to share equitably in the true value of the company," Myers said.
The suit also takes issue with various provisions in the merger agreement that allegedly discourage competing offers and set the deal in stone, including a so-called "top-up" option allowing Fertitta dodge a shareholder vote on the deal by purchasing shares to reach the 90 percent threshold necessary to complete the merger.
Private equity fund Castle Harlan Partners III LP, which owns roughly 28 percent of the Morton's outstanding shares, has entered into an agreement to tender its shares into the offer and vote in favor of the merger.  The fund's CEO John Castle is also a Morton's director and a defendant in the suit.
The plaintiff is seeking an injunction barring the deal, along with unspecified damages.
The complaint comes on the heels of a settlement last week in a similar class action in the same court over Fertitta's proposed purchase of McCormick & Schmick's Seafood Restaurant. McCormick agreed to disclose additional information on the deal to shareholders in return for the claims being dropped, according to court documents.
Chicago-based Morton's owns 77 restaurants throughout the U.S. and one in China.  Fertitta's acquisition of the chain is expected to close in February.
Myers is represented by James P. McEvilly and Juan E. Monteverde of Faruqi & Faruqi LLP.
Counsel information for the defendants was not immediately available.
The case is Lon Myers v. Morton's Restaurant Group Inc. et al., case number 7122, in the Delaware Court of Chancery.
--Additional reporting by Sindhu Sundar. Editing by Elizabeth Bowen.

RELATED FILES

Thursday, December 1, 2011

Ladish Shareholders Sue To Block $778M Allegheny Buy

DECEMBER 01, 2011

Ladish Shareholders Sue To Block $778M Allegheny Buy
By Leigh Kamping-Carder
Law360, New York (December 01, 2010, 1:47 PM ET) -- A Ladish Co. Inc. shareholder has launched a putative class action seeking to stop the $778 million acquisition of the Wisconsin metal components producer by specialty metals manufacturer Allegheny Technologies Inc.
Irene Dixon filed a complaint Tuesday in the U.S. District Court for the Eastern District of Wisconsin, alleging that the consideration Ladish shareholders would receive is “woefully inadequate.”
The suit, filed by Jason R. Oldenburg and Kathleen F. Goodrich of Previant Goldberg Uelmen Gratz Miller & Brueggeman SC and Nadeem Faruqi and Juan E. Monteverde of Faruqi & Faruqi LLP, alleges that the Ladish board of directors engaged in self-dealing.
Under the terms of the deal, Allegheny will pay Ladish shareholders $24 in cash plus 0.445 percent of a share of Allegheny stock in exchange for each share of Ladish stock. The consideration amounts to $48 per share based on the average trading price of Allegheny stock in the 10 days leading up to the Nov. 17 announcement, the companies said.
Since then, however, the Allegheny share price has dropped from the mid-$50 range to $48.50, cutting into the value for Ladish shareholders, according to Dixon. Meanwhile, Ladish is set to improve its financial outlook as the economy recovers, the complaint claims.
Based in Cudahy, Wis., Ladish experienced a dip in 2009, with a 25 percent drop in sales compared to 2008. But in July, the company reported something of a rebound.
Ladish President and CEO Gary J. Vroman, who is named as a defendant, said in October that every Ladish product “has new opportunities lined up in 2011 which will drive growth.”
Dixon also claims that Vroman and Vice President of Law and Finance Wayne E. Larsen stand to benefit from the transaction through lucrative severance packages. Larsen and Vroman, who have worked for the company for nearly 30 years, do not own significant Ladish stock, according to the suit.
The merger agreement also includes certain provisions — including a nonsolicitation clause and a $31 million termination fee — that make the Allegheny acquisition a “fait accompli,” the suit said. Ladish's financial adviser, which owns Allegheny stock, has a conflict of interest, Dixon claims.
Larsen and a spokesman for Allegheny did not immediately respond to requests for comment on Wednesday.
Dixon, a New York native, brought the suit on behalf of all Ladish shareholders. She alleges the Ladish board of directors breached their fiduciary duties of loyalty, due care, diligence, good faith and fair dealing and independence.
The transaction, which is still subject to approval from Ladish shareholders, is expected to close in early 2011.
Ladish engineers, manufactures and markets technologically advanced metal parts for the jet engine, aerospace and industrial markets. Its top three customers — Rolls-Royce Motor Cars Ltd., United Technologies Corp. and General Electric Co. — account for more than half its revenues, with the bulk of the remainder coming from contracts with the U.S. and foreign governments, according to the complaint.
In announcing the Allegheny acquisition, Vroman said, “new markets are well within our reach that were previously a stretch for us. Without question, this merger significantly improves the long-term outlook for Ladish.”
L. Patrick Hassey, Allegheny's chairman and CEO, said the combination of his company's product portfolio and Ladish's forging, investment casting and machining capabilities would create a “more integrated, stable and sustainable supply chain for the aerospace, defense and industrial markets.”
Dixon is represented by Previant Goldberg Uelmen Gratz Miller & Brueggeman SC and Faruqi & Faruqi LLP.
Counsel information for the defendants was not immediately available.
The case is Dixon v. Ladish Co. Inc. et al., case number 2:10-cv-01076, in the U.S. District Court for the Eastern District of Wisconsin.