Some shareholders of Ladenburg Thalmann have filed two individual lawsuits and one class action suit against the firm to block its planned acquisition by Advisor Group or force the firm to disclose certain financial projections left out of the proxy statement filed on Dec. 6, claiming the acquisition price is too low.
Ladenburg shareholders Shiva Stein and Harold Bonnikson filed separate lawsuits in U.S District Court for the Southern District of New York, arguing that the proxy statement filed in the wake of the deal announcement omitted certain financial projections, and that the transaction undervalued Ladenburg shares. The valuation analyses conducted by Jefferies, the firm’s advisor on the deal, were also incomplete, they argue. They’re seeking to stop the deal from going through, unless the information described in the complaints is disclosed to shareholders.
“Unlike poker where a player must conceal his unexposed cards, the object of a proxy statement is to put all one’s cards on the table face-up,” said Bonnikson, in his complaint. “In this case only some of the cards were exposed—the others were concealed.”
In November, Advisor Group announced plans to acquire Ladenburg and its five broker/dealers through a cash merger, which, if consummated would create a b/d network with 11,500 advisors and over $450 billion in assets. In a flash poll conducted by WealthManagement.com, most Ladenburg advisors said they were not completely buying the story that the deal would cause little disruption but were cautiously optimistic they would benefit from the deal.
Richard Scarantino, another shareholder of Ladenburg stock, filed a class action suit in a Delaware district court; his suit includes Advisor Group as a defendant. In his complaint, he argues the firm failed to disclose line items used to calculate income before taxes and adjusted EBITDA. The proxy also failed to provide reconciliation of all non-GAAP to GAAP metrics. He also points to Jefferies’ analysis lacking certain details.
Stein and Bonnikson argue in their cases that shareholders did not get the proper value for their shares.
The total value of the deal was $1.3 billion, including Ladenburg stock, preferred stock and outstanding debt. Outstanding shares of Ladenburg stock will be converted into a cash payment of $3.50 a share, a 23% premium to where the stock was trading before the announcement.
But that’s a 13% discount to the stock’s 52-week-high trading price leading up to the announcement, Bonnikson claims. Indeed, in May, shares reached a high of $4.02.
“Further, in each of the past two quarters, Ladenburg outperformed expectations by beating revenue estimates,” the complaint said.
Corporate mergers are often the target of lawsuits by activist shareholders and serial litigants. The lawsuits in this case name several Ladenburg executives, including CEO Dick Lampen and Chief Operating Officer Adam Malamed. A spokesman for Ladenburg and Advisor Group did not respond to a request for comment.