Matthew Staver/Bloomberg NewsDel Monte agreed last November to sell itself to Kohlberg Kravis Roberts, Vestar Capital and Centerview Capital for $5 billion.
Del Monte Foods said in a regulatory filing on Thursday that it and Barclays Capital had settled a shareholder lawsuit over the company’s leveraged buyout, paying $89.4 million to resolve claims that the deal was improperly managed.
The settlement, one of the biggest recorded in Delaware’s Court of Chancery, resolves one of the most publicly visible disputes over the financing that accompanies private equity deals.
Known as “stapled financing” within the industry, the practice was increasingly common during the leveraged buyout boom — but led to accusations that banks had conflicts of interests between their private equity clients and the companies they were trying to sell.
Del Monte agreed last November to sell itself to Kohlberg Kravis Roberts, Vestar Capital and Centerview Capital for $5 billion, and the deal closed in March.
But shareholders, led by an Illinois pension fund, accused the company of not running a robust auction process that would have fetched the highest possible price for shareholders.
At the heart of the dispute was Barclays’s role as an adviser to the seller and a provider of financing to potential buyers. Documents unearthed through the litigation showed that Barclays first began shopping Del Monte as an acquisition target to potential buyers, hoping to reap big fees by lending private equity firms money for a deal.
According to the documents, Barclays improperly allowed K.K.R. and Vestar to team up, despite having previously agreed not to.
The plaintiffs drew much of the base for their case from a ruling by Vice Chancellor J. Travis Laster of the Chancery Court, finding that Barclays “materially reduced the prospect of price competition for Del Monte.”
Under the terms of the settlement, Del Monte will pay $65.7 million, while Barclays will pay $23.7 million. Both deny all accusations of wrongdoing.
Stuart Grant, a lawyer for the plaintiffs, said in a statement: “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.”
Kerrie Cohen, a Barclays spokeswoman, said in a statement: “We are pleased that the parties have agreed to settle the litigation to avoid the expense, distraction and uncertainty of litigation. We believe that the sale process leading up to the merger achieved the best price reasonably available for Del Monte stockholders.”
Del Monte and Barclays Settlement With Shareholders
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