Girard Gibbs LLP represents various institutional shareholders of Safeway, Inc. in a class action lawsuit related to Cerberus Capital Management’s proposed acquisition of Safeway Inc. The lawsuit has been filed in Delaware Court of Chancery against Safeway, its officers and directors, Cerberus and various Cerberus affiliates.
Girard Gibbs filed a lawsuit on behalf of four U.S. and European institutional investors. All of the actions have been consolidated before Vice Chancellor J. Travis Laster, who appointed Girard Gibbs to the Plaintiffs’ Executive Committee.
If you have questions concerning the lawsuit please call 866 981 4800 or fill out the Form to the Right.
Breach of Fiduciary Duties to Shareholders, alleged
On March 6, 2014, Safeway and Cerberus issued a joint press release announcing that Cerberus would acquire Safeway for an implied value of $40 per share. Yet Safeway stockholders will only receive $32.50 per share in cash. The balance of the purported value is actually a combination of a $3.95 per share distribution from the spinoff of Safeway’s partial ownership of Blackhawk Network Holdings, Inc. that was planned prior to the merger announcement and will be distributed before the proposed merger is consummated, and an entirely speculative $3.65 per share distribution from potential future sales of certain non-core assets.
In contrast, Safeway’s board and executives will benefit from immediate vesting of stock options, restricted share awards, performance share awards, or other monetary and non-monetary benefits not shared by stockholders. The lawsuit alleges that Safeway’s board breached its fiduciary duties to stockholders by failing to obtain the highest possible value for the company.
Flawed Acquisition Process, alleged
The lawsuit also alleges that the inadequately priced deal involves a flawed process that includes a number of onerous and preclusive deal protections that serve to deter competing bidders from offering a higher price. In particular, the merger agreement includes an unusually short 21-day “go-shop” period that expired on March 27, 2014, during which time the Board could solicit superior proposals from third parties. However, the definition of “Superior Proposal” in the merger agreement eviscerates any chance of a superior offer because a potential acquirer must top the illusory $40 valuation of the Proposed Merger consideration. Further, the merger agreement provides Cerberus with unlimited matching rights, so that a competing bidder can never force Cerberus to put a “best and final” offer on the table.
Improper Servance Plan Alleged
The Board also adopted an Executive Severance Plan on the eve of announcing the Cerberus deal, which would trigger potentially tens of millions of dollars in severance payments to Safeway’s senior management upon their qualifying termination. The Executive Severance Plan has no impact on Cerberus, which has already announced that Safeway’s senior management will be employed in similar positions in the newly combined entity. However, the Plan would have a substantial impact on strategic buyers who would want to replace executives and be forced to pay tens of millions of dollars in severance payments, thus serving as another improper deal protection favoring Cerberus.
Questions About the Safeway Adquisition Lawsuit?
If you have any questions about the case, please call (866) 981-4800 or fill out the form to the right to receive email updates about the progress of the case.