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Delaware Judge Approves $89 Million Sweetener To Settle Del Monte Shareholder Suit

Posted  December 9, 2011

Delaware Judge J. Travis Laster has approved a settlement requiring Del Monte Corp. and Barclays Capital Inc. to pay $89.4 million to Del Monte shareholders to resolve claims relating to the March 2011 acquisition of Del Monte by funds affiliated with Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners, and Centerview Partners.

Under the terms of the March 2011 sale of Del Monte, shareholders were entitled to receive $19 for each share of Del Monte common stock held.  The completion of the acquisition prompted investors to file suit in Delaware alleging that they were not being fairly compensated for their shares in the buyout and accusing Barclays of manipulating the acquisition of Del Monte to boost its revenues.  Investors also accused Barclays of not disclosing its conflict of interest in receiving $23.5 million to advise Del Monte on the deal while also receiving up to $24 million for financing the buyers.

Other investors also filed suit in federal court in California alleging that Kohlberg Kravis Roberts & Co. and Vestar Capital engaged in bid rigging and colluded on the offer amount for Del Monte Corp.  In this antitrust suit, shareholders alleged that the two private equity firms originally competed to buy Del Monte before joining forces to artificially drive down the sale price.  Following the filing of this suit, the Antitrust Division of the U.S. Department of Justice launched a probe into the antitrust claims.

The California claimants petitioned Judge Laster to allow an opt-out in order to pursue the federal antitrust claims in California.  Judge Laster refused to include an opt-out provision in certifying the shareholders as a class, noting that the antitrust claims were based on the same facts as those in the Delaware case and had been considered by attorneys for the shareholders in reaching the settlement.  The judge further noted that attorneys in the California case had yet to file an amended complaint following the dismissal of its antitrust lawsuit by a federal judge in August.

As part of the settlement, Del Monte agreed to pay $65.7 million in cash to be released from these and further shareholder claims and Barclays agreed to contribute $23.7 million.  Although the settlement bars shareholders from filing other lawsuits, the judge noted that the settlement will not affect the ongoing investigation by the Antitrust Division.

Tagged in: Antitrust Litigation,