The $6.3 billion leveraged buyout of Kinetic Concepts Inc. has sparked a lawsuit from a shareholder unhappy the wound-care products maker isn’t being sold for more money.
The lawsuit, filed last week in Bexar County District Court, accuses KCI and its directors of gross mismanagement and breaches of fiduciary duty in connection with the sale of the company to a group led by London-based private-equity firm Apax Partners.
Such civil charges aren’t uncommon when a publicly traded company discloses plans to be sold.
No fewer than 15 law firms issued press releases announcing they were investigating potential claims against KCI following the July 13 announcement of the deal. At least one firm issued its release within an hour of when the deal was announced.
KCI General Counsel John Bibb described such investigations as an unfortunate “part of the process” of being sold, according to a transcript of a presentation he gave to employees on July 14.
“We believe we’ve followed a very rigorous process and that the board of directors has done everything in its power to represent you as shareholders and the other shareholders that are out there in the public marketplace,” Bibb said.
Bibb added the law firms were “just racing to the front of the line to say we get to be the lead plaintiffs in the case.”
Three law firms filed the Bexar County District Court case, which is believed to be the first filed against KCI over the transaction. KCI spokesman Joe Izbrand said the company is aware of the suit and “confident of its position.”
The shareholder derivative suit seeks certification as a class action, brought on behalf of all shareholders and the company.
The suit’s lead plaintiff, Sharon Meg Dunn, seeks to either stop the sale or, if the sale goes through, to recover unspecified financial damages caused by the alleged breaches of fiduciary duty. The suit didn’t mention where Dunn lives.
Under terms of the deal, KCI agreed to be sold to the Apax-led group for $68.50 a share, plus debt.
That’s not enough, Dunn claims in the suit. It cites a report from a financial advisory firm that said KCI shares should be valued at $73 to $76. Apax is named as a defendant.
If a deal is consummated, the suit adds, it “will likely result in Kinetic’s shareholders being cashed out of their interest in the company at below the company’s true value.”
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