Two shareholder lawsuits have been filed against Monster, charging the deal to sell the company to the Dutch staffing giant Randstad “is the result of an unfair process and provides the Company’s stockholders with inadequate consideration,” in the words of one of the lawsuits.
Both suits, which seek class action status, make essentially the same charges: that Monster’s Board of Directors and its senior managers rushed into the Randstad deal without fully negotiating with other potential buyers who were making initial offers higher than the $3.40 a share Randstad offer.
Both are asking the federal district court in Massachusetts to halt the sale.
Coached in the language of securities law, the two suits (Litwin V. Monster Worldwide and Dagut v. Monster Worldwide) claim the disclosures Monster made in its filings with the Securities and Exchange Commission were inadequate and misleading and even false. Among the charges contained in both lawsuits is one claiming Monster should have disclosed the full extent of the benefits and compensation company executives and directors are due to receive if the sale goes through. In the words of one of the suits:
The Board and the Company ‘s executive officers are conflicted because they will receive unique benefits from the Proposed Transaction not available to Plaintiff and the public stockholders of Monster.
While Monster’s public stockholders are being cashed out for an inadequate price and foreclosed from participating in the future growth of Monster, in connection with the merger the Company’s directors and officers will achieve a substantial payday.
These benefits, according to the suits, include payment for stock whether or not they’re vested. In the event Randstad terminates Monster’s executives, they’ll receive substantial severance payouts.
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Numerous other claims are made in the court filings, all relating to lack of transparency about the financial projections and analyses provided by Monster’s financial advisor and other, similar financial matters. In addition, both suits say shareholders have a right to more information about why the Monster board agreed to terms in the merger agreement that largely keep directors and company officials from seeking other offers or conducting discussions with others without first notifying Randstad and giving it all the details about other bid inquiries.
The Litwin suit also says shareholders have a right to know, and Monster had a duty to explain in its filings, why the board didn’t break the deal when Randstad lowered its $4.00 a share offer to $3.40 just a few days before the sale was to be announced. The Litwin suit also maintains Monster must explain why it decided not to pursue talks with other suitors.
Lawsuits like these are almost inevitably filed in large transactions involving public companies. Not many days after Monster and Randstad announced their deal on August 9, two law firms (not those involved in the cases now filed) announced they were looking into the sale. In the case of the two lawsuits already filed, both of which share an attorney in common — Mitchell J. Matorin — it is possible the court may want to combine them since both make the same claims.