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Dive Brief:
A Skechers shareholder group is suing the footwear giant for allegedly violating federal securities law in its agreement to be acquired by 3G Capital.
Attorneys for the plaintiff, Key West Police Officers & Firefighters Retirement Plan, say Skechers failed to file a Schedule 13E-3 with the U.S. Securities and Exchange Commission, which is required in go-private deals.
In addition, the complaint was filed against Skechers CEO and Chairman Robert Greenberg and President Michael Greenberg individually. Attorneys for the plaintiff say both executives “made no representation that they intend” to file the document.
Dive Insight:
Skechers announced its agreement with 3G in May, in a proposal valued at about $9.4 billion. If approved, the arrangement would be one of the largest privatization deals in the softlines industry in years. The terms of the deal include Skechers’ executive leadership team remaining in place.
Schedule 13E-3 documents give shareholders information on the purposes of a transaction, whether alternatives were considered and whether the transaction is fair to unaffiliated shareholders.
The new complaint was filed Thursday in the U.S. District Court for the Central District of California.
Skechers declined to comment on pending litigation.
The Skechers-3G merger agreement gives Skechers shareholders five business days after the close of the deal to select their cash consideration option. The company is offering stockholders a full cash consideration option, valued at $63 per share, or a mixed consideration option, valued at $57 per share, which also gives shareholders one unit of stock in the new Skechers. If shareholders don’t make a decision, they will automatically receive the full cash consideration option.
Attorneys for the plaintiff say the 13E-3 contains necessary disclosures and that the shareholder group should not have to make its decision without “full and accurate information concerning the Merger, the Company, and its financial condition and prospects.”
Key West Police Officers & Firefighters Retirement Plan is asking the judge in the case to stop the enforcement of the election deadline until the document is filed with the SEC.
The complaint claims that the deal raised “red flags,” referencing a May 5 client note from Needham & Company investment bank that said the deal was surprising because Skechers had always been known as a family business that wasn’t for sale.
“It appears that the Greenbergs controlled the sales process to a single bidder and deprived the minority shareholders of any legitimate bidding process,” the complaint stated.
