TBC Corp.'s tender offer for all of Midas Inc.'s stock has cleared one legal hurdle, but Midas recently acknowledged the existence of two “purported stockholder class action” complaints filed by “alleged” shareholders in Delaware state court.
The Federal Trade Commission terminated on March 30 the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) for an “acquistion transaction” such as the TBC-Midas merger, TBC and Midas said April 2 in a joint release.
The expiration of the HSR Act waiting period satisfies one of the conditions to the tender offer, which will expire at midnight EDT on April 24, unless extended in accordance with the merger agreement and the applicable rules and regulations of the Securities and Exchange Commission (SEC).
TBC initiated the cash tender offer, for $11.50 a share, through its wholly owned subsidiary, Gearshift Merger Corp., on March 28.
The suits, filed March 28 and March 30, respectively, by Rod Sowder and Alan Kahn in Delaware's Court of Chancery, allege the members of Midas' board “breached their fiduciary duties to the company's stockholders by failing to take steps to maximize the value of the company to its public stockholders….”
The suits seek “equitable relief,” including an injunction of the merger and unspecified damages.
Midas said it believes the allegations are “without merit” and it inends to defend the action “vigorously,” according to the filing.
The suits contend Midas' board agreed to sell for “inadequate consideration” and negotiated the deal through a “tainted process.”
In particular they accuse the board of being driven by self-interest so as to cash out “large and illiquid” holdings of stock.
Midas Chairman Alan Feldman stands to receive nearly $6 million alone for selling shares he owns, the Sowder complaint claims.
TBC's offer of $11.50 a share represents a premium of 28 percent over the stock's March 12 closing price and a 75-percent premium over the Aug. 11 closing price of $6.58 when Midas announced the start of a strategic review.
The Kahn complaint states that TBC initially offered Midas a “non-binding indication of interest” of $12 to $14 per share in September 2011, pending due diligence.