Shareholder Suits Target Pinnacle Foods' Pending Merger With Conagra
Pinnacle, headquartered in Parsippany, announced on June 27 that Chicago-based Conagra would acquire it in a $10.9 billion cash and stock transaction.
August 10, 2018 at 05:12 PM
3 minute read
Pinnacle Foods Inc. is battling a string of suits in Newark federal court from shareholders who accuse the company of misleading them about its planned merger with Conagra Brands Inc.
Plaintiff Alexander Rasmussen filed a putative class action on Aug. 7, claiming Pinnacle filed a false and misleading proxy statement about the merger on July 25.
Another plaintiff, Robert Paquette, made similar allegations against Pinnacle in a putative class action filed Aug. 9. And a third plaintiff, Wesley Lindquist, also sued the company Aug. 9, likewise accusing it of making false or misleading statements about the pending merger in its proxy statement filed with the SEC.
Pinnacle, headquartered in Parsippany, makes grocery products such as Lender's bagels, Log Cabin syrup and Mrs. Paul's fish sticks. It announced on June 27 that Chicago-based Conagra would acquire it in a $10.9 billion cash and stock transaction.
The plaintiffs seek to halt the deal until Pinnacle discloses information they claim is missing from the proxy statement. Lindquist's suit claims Pinnacle and its board of directors have issued public filings that intend to solicit stockholder support for the Conagra deal but omit critical information, such as valuation analyses performed by Pinnacle's financial advisers. Lindquist also said Pinnacle fails to provide information about the potential conflicts of interest involving one of the financial advisers, Credit Suisse, which had a prior relationship with Conagra.
“A financial advisor's own proprietary financial interest in a transaction must be carefully considered when assessing how much credence to give its analyses and opinions. A reasonable shareholder would want to know what important economic motivations that the advisor, employed by a board to assess the fairness of the merger to the shareholders, might have. This is especially true when that motivation could rationally lead the advisor to favor a deal at a less than optimal price, because the procession of a deal was more important to them—given their overall economic interest—than only approving a deal at truly fair price to shareholders,” Lindquist's complaint said.
Paquette adds a claim that Pinnacle's SEC filings about the merger are lacking in financial information about Conagra. Such information is relevant because, on the closing of the transaction, Pinnacle shareholders will own 16 percent of the equity interests in Conagra, that complaint said.
“We brought the suit because they left out some key financial information, which makes it difficult for shareholders to vote for or against the transaction on a fully informed basis,” said Carl Stine of Wolf Popper in New York, who represents plaintiff Rasmussen.
Stine said he would like to see the raw data that went into Pinnacle's discounted cash flow analysis, such as projected earnings before interest and taxes, depreciation, amortization, capital expenditures and changes in working capital.
“The law isn't specific about exactly what has to be provided,” Stine said, but “once they go down the road of making some kind of disclosure, they can't make a partial disclosure.”
A Pinnacle spokeswoman said the company does not comment on pending litigation.
Credit Suisse did not respond to a reporter's call about the case.
Joseph DePalma of Lite DePalma in Newark, who represents Paquette, and Donald Enright of Levi & Korsinsky in Washington, D.C., who represents Lindquist, did not return calls seeking comment.
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