Payment by Del Monte and Barclays one of the largest cash settlements ever in Delaware Chancery Court; case has upended investment banking practice of providing sell-side financing in M&A transactions

WILMINGTON, Del., Oct. 6, 2011 /PRNewswire/ -- Ending a case that has reformed longstanding conflicts within the investment banking community on M&A deals, Del Monte Corporation and Barclays Capital Inc. have agreed to pay $89.4 million to Del Monte shareholders who were cashed out in the 2010 buyout of Del Monte by a group of private equity firms led by Kohlberg Kravis & Roberts.  

The payment is one of the largest cash settlements on record in Delaware Chancery Court – Del Monte will contribute $65.7 million while Barclays will pay $23.7 million.  The lawsuit, which challenged the common practice by many deal advisers to simultaneously offer sell-side financing in a transaction, led to sweeping changes in the way investment banks conduct business in the M&A marketplace.

Law firms Grant & Eisenhofer and Robbins Geller Rudman & Dowd represent the NECA-IBEW Pension Trust Fund, a Decatur, Illinois pension fund, as lead plaintiff on behalf of a class of Del Monte shareholders who opposed the way in which the storied food company and its investment bank transacted the sale of Del Monte to a consortium of private equity investors.  

"We are proud to have obtained such a significant recovery on behalf of the hard working members of the Fund and the class as a whole.  We believe it is important and valuable for Taft-Hartley pension funds to step up and protect shareholder rights and interests in cases like this," said Robert L. Williams, NECA-IBEW Pension Trust Fund Administrator.

An injunction ruling earlier this year by Chancery Court Vice Chancellor J. Travis Laster led to an immediate industry-wide retreat by investment banks from providing financing for deals in which they also represented the sellers. Bloomberg News reported that since the Del Monte ruling came down, "no firm has offered sell-side financing for a U.S. public company buyout valued at more than $1 billion...In the previous 2 1/2 years, it was offered about 40 percent of the time for deals of that size."  As noted corporate governance expert Larry Hamermesh of Delaware's Widener University remarked to Bloomberg, Chancellor Laster's ruling "got the attention of every bank across Wall Street.  It does seem like banks are exercising across-the-board caution after Del Monte."  The deal was eventually approved by a shareholder vote this past March.

"The $89.4 million payment to shareholders, when added to the major changes that have occurred in the investment banking community in response to Vice Chancellor Laster's injunction obtained earlier in the case, makes this a great result for stockholders, not only those holding shares in Del Monte, but all public equity holders of companies involved in M&A transactions," said Stuart Grant of Grant & Eisenhofer.

Randall Baron, a partner with Robbins Geller, added, "This case has sharply reined in certain practices within the investment banking community, where many financial advisers regularly gamed the M&A process through double-dip engagements that buyers and sellers not only tolerated but often encouraged, particularly in public-to-private deals.  We believe the settlement delivers to Del Monte's common shareholders the added premium they rightly deserved through the buyout, and we are gratified that our litigation sparked a pullback among major banks of advising parties on both sides of a transaction."

The settlement is subject to approval by Vice Chancellor Laster.  If approved, it will resolve all litigation over the sale of Del Monte.

Also working with the plaintiffs as co-lead counsel was Robbins Geller partner Rick Atwood and Grant & Eisenhofer partner Michael Barry, along with associates Michele Carino and Christine Mackintosh.

Note:  Grant & Eisenhofer P.A. represents institutional investors and shareholders internationally in securities class actions, corporate governance actions and derivative litigation.  The firm has recovered more than $13 billion for shareholders in the last five years and has consistently been cited by RiskMetrics for securing among the highest average investor recovery in securities class actions.  Grant & Eisenhofer has been named one of the country's top plaintiffs' law firms by the National Law Journal for the past six years. For more information about Grant & Eisenhofer, visit www.gelaw.com.

Robbins Geller Rudman & Dowd LLP, a 180-lawyer firm with offices in San Diego, San Francisco, New York, Boca Raton, Washington, D.C., Philadelphia and Atlanta, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations.  For more about the firm, visit www.rgrdlaw.com.

Contacts:

Grant & Eisenhofer: Allan Ripp/212-262-7477 arippnyc@aol.com; Elise Martin/302-622-7004 emartin@gelaw.com
Robbins Geller:  Dan Newman or Randall Baron 619-231-1058 dnewman@rgrdlaw.com

SOURCE Grant & Eisenhofer; Robbins Geller Rudman & Dowd LLP