Shareholder suits settled by Del Monte and Barclays

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On behalf of Daniel Watkins of Watkins Firm, A Professional Corporation posted on Friday, October 7, 2011.

Shareholders of the Del Monte Corporation who were dissatisfied with the actions of the company’s board and the company’s financial advisor, Barclays Capital, sued both Del Monte and Barclays for failing to act in the shareholders’ best interests during the $4 billion acquisition of Del Monte by KKR and Co.

It was recently announced that Del Monte and Barclays have agreed to settle the suit, paying shareholders nearly $90 million.

San Diego mergers and acquisitions attorneys have noted that the claims resonated, in a negative way, with many other companies and their financial advisors, because of the commonplace relationships between banks and the businesses that they advise. The shareholder suit raised the issue of potential conflict of interest in practices that are a standard way of doing business for many banks.

The shareholder suit claimed a conflict of interest on the part of Barclays because the bank arranged financing for Del Monte’s buyer, KKR. The practice of offering financing to buyers is known as “staple financing,” and is not at all uncommon.

It was interesting the way that Del Monte and Barclays agreed to their respective portions of the payout to Del Monte shareholders. Barclays will pay almost $24 million, and Del Monte almost $66 million. However, $21 million of Del Monte’s portion is in lieu of fees due to Barclay’s. As a result, each entity will end up paying a roughly equal portion of the settlement.

Source: Reuters “Del Monte, Barclays to pay $89.4 mln in settlement” Oct. 6, 2011