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Investors sue over Clarient, AGA Medical acquisitions

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GE Healthcare, Clarient, STJ, AGAM logos

Shareholders of two companies set to be acquired are suing over the offers, alleging that the companies breached their fiduciary duties in agreeing to the buyouts.

Investors in AGA Medical Holdings Inc. (NSDQ:AGAM) sued in the Delaware Chancery Court over St. Jude Medical Inc.’s (NYSE:STJ) $1.3 billion offer for AGA, alleging that "the proposed transaction is the product of a flawed process that resulted from the board’s failure to maximize shareholder value and deprived AGA Medical’s public shareholders of the ability to participate in AGAM Medical’s long term prospects," according to a press release.

And investors in Clarient Inc. (NSDQ:CLRT), in a lawsuit filed in the same court, accuse that company of agreeing to terms that prevent the company from shopping around for a better deal than General Electric Co.’s (NYSE:GE) $587 million offer.

"To the detriment of Clarient’s shareholders, the merger agreement’s terms substantially favor GE and are calculated to unreasonably dissuade potential suitors from making competing offers," according to the complaint.

St. Paul, Minn.-based St. Jude announced the acquisition of AGA and its portfolio of transcatheter heart repair devices Oct. 18. The company’s $20.80-per-share bid for its Twin Cities peer is a roughly 41 percent premium over AGA Medical’s Oct. 15 closing price of $14.71. AGAM shares soared after the news broke, closing at $20.97 Oct. 21.

The plaintiffs in the St. Jude/AGA Medical lawsuit cite the fact that 65 percent of AGA Medical’s shares are already tied up in the deal (via tendering commitments from co-founder Franck Gougeon, who owns 20 percent of AGAM, and Welsh Carson Anderson & Stowe and its 45 percent stake).

"[T]he proposed transaction will go forward if St. Jude receives the tender of a least a majority of the company’s shares outstanding," according to the release.

"In addition the plaintiff claims the proposed transaction is the result of an unfair process exacerbated by the unfair terms specified in the merger agreement," including a $32.5 million termination fee.

GE Healthcare’s $20-per-preferred-share and $5-per-common-share bid is a 33 percent premium over CLRT’s $3.77 closing price Oct. 21.

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