Focus Financial Partners announced in February the public company is going private after being acquired by private equity firm Clayton, Dubilier & Rice in an all-cash transaction, with an enterprise value totaling more than $7 billion and stockholders set to receive $53 per share. Private equity firm Stone Point Capital will also retain its ownership stake.
Late last month, one of the firm’s shareholders filed a lawsuit against the company, claiming the price is unfair to investors, senior executives stand to monetize their interests, and Focus’ proxy statement contains misleading statements and omits material facts. Brian Levy, who, the complaint says, owns Focus Class A common stock, filed the lawsuit June 19 in the Supreme Court of the State of New York, Nassau County.
On Thursday, Focus filed a supplement to the proxy with the Securities and Exchange Commission, addressing many of Levy’s claims.
“The Company specifically denies all allegations in the foregoing complaint, including without limitation that any additional disclosure was or is required,” Focus said in the filing. “As a result of the supplemental disclosures set forth herein, the named plaintiff in the Levy action has decided that the claims in the lawsuit have been mooted and will dismiss the action with prejudice on or before July 11, 2023.”
A Focus spokeswoman declined to comment. An attorney representing Levy did not respond to requests for comment.
Among other things, the complaint alleges the proxy was misleading around the conflicts of interest of those promoting the buyout, the company’s business prospects, valuation and strategic alternatives, and information Focus’s investment bankers use to determine whether the buyout was fair.
Focus added several disclosures to the proxy statement, including that board members, such as CEO Rudy Adolf and COO Rajini Sundar Kodialam, will receive cash payments for their unvested common units and incentive units. The filing said Adolf would be entitled to more than $16 million, while Kodialam would get more than $12 million.
When Focus first announced the buyout, several shareholders expressed concerns. They argued the price—$53 per share—did not reflect the company’s true worth and wondered whether Focus’ board of directors had done their due diligence in seeking the best deal for the company’s shareholders. They also expressed frustration that Stone Point Capital, the largest investor in the public company, would be the only existing shareholder allowed to roll equity into the new private company.
In March, several law firms started looking into whether Focus’ board members breached their fiduciary duties in agreeing to the sale at $53 per share.