Law firms from around the country wasted little time in pouncing on the proposed $2.7 billion deal that will put locally based Genworth Financial under ownership of a Chinese conglomerate.
Less than 24 hours after the deal was announced on Oct. 24, press releases hit online wires announcing that various law firms were “investigating” the transaction and whether it’s fair or in Genworth shareholders’ best interests.
The announcements came from law firms in New York, New Orleans, Dallas and elsewhere, with most questioning the per-share price offered to the Henrico-based insurance giant by suitor China Oceanwide Holdings Group. According to the agreed-upon terms, Genworth shareholders will receive $5.43 in cash for each share they own, amounting to a $0.22 per share premium based on the closing price of the company’s stock prior to the deal announcement.
San Diego law firm Robbins Arroyo, for example, states that its investigation “focuses on whether the board of directors at Genworth Financial is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.”
The firm questions the per share price, pointing out that the 4.2 percent per share premium that Oceanwide is offering is “significantly below the average one day premium of nearly 46.27 percent for comparable transactions within the past three years.”
That firm goes on to inform shareholders of their option to file a class action lawsuit.
The law firms’ efforts are not uncommon and have become a kind of rite of passage for many big merger and acquisition deals for companies in any sort of industry.
The law firms’ press releases are always similarly worded with a focus on supposed investigations, with a goal of locating unhappy shareholders willing to put their names on lawsuits that often look to block the deals, force changes in the terms or extract potentially lucrative settlements.
Such suits are often settled, dropped altogether or can lead to amendments in the language of the proposed transactions.
The practice has affected a spectrum of Richmond deals both large and small in recent years, including local Fortune 500 Owens & Minor’s $208 million acquisition of a medical supply company in New York.
Locally based Union Bankshare’s acquisition of StellarOne Bank also caught the eye of class-action firms, resulting in a lawsuit that quickly moved toward a settlement.
As of Friday afternoon, no suits had been filed in federal courts related to the Genworth/China Oceanwide deal.
Asked how and whether the company prepared for this legal trend, a Genworth spokesperson said the company does not comment on legal matters.