A group of Vascular Solutions (NSDQ:VASC) shareholders last week sued to block a $1 billion buyout by Teleflex (NYSE:TFX), arguing that the deal undervalues Vascular Solutions and locks out any competing bids.
The purported class action, filed Jan. 27 in the U.S. District Court for Minnesota, alleges that the $56-per-share Teleflex deal is an “inadequate consideration” for Vascular Solutions.
“Among other things, the intrinsic value of the company is materially in excess of the amount offered in the proposed transaction,” the complaint alleges. “Accordingly, the proposed transaction will deny class members their right to share proportionately and equitably in the true value of the company’s valuable and profitable business, and future growth in profits and earnings.”
The lawsuit also alleges that Vascular Solutions’ management, including CEO Howard Root, “have all but ensured that another entity will not emerge with a competing proposal” by assenting to a “no solicitation” provision barring them from shopping around for a better deal. The provision “severely constrains [management’s] ability to communicate and negotiate with potential buyers who wish to submit or have submitted unsolicited alternative proposals,” according to the complaint.
The deal also requires Vascular Solutions to let Teleflex know of any 3rd-party proposals, gives Teleflex the right to match any better offers and limits Vascular’s board’s ability to back out of the agreement.
“By agreeing to all of the deal protection devices, the individual defendants have locked up the proposed transaction and have precluded other bidders from making successful competing offers for the company,” the lawsuit alleges. “Meanwhile, certain of the company’s officers and directors stand to receive substantial benefits as a result of the proposed transaction.”
Root is slated to receive about $8 million and the other named officers a collective $8.3 million, according to the suit.
“Vascular Solutions and the individual defendants believe that the plaintiff’s claims are without merit,” the company said in a regulatory filing.