Due to a settlement between Barclays Capital and Del Monte Foods over the sale of its pet food business, lawyers involved in the case are poised for “sweeping changes” in the investment banking industry. Industry insiders, however, have mixed opinions.
This week, a Delaware judge accepted an October settlement with the Del Monte shareholders regarding a dispute from a buyout of the company’s pet foods division dating back to 2010. This marks an $89.4 million dollar settlement brokered by the Delaware that the two parties involved acted improperly in the business sale to a consortium of private equity investors by a New York based KKR & Company-led buyout.
Delaware Chancery Judge J. Travis Lester delayed the vote last month because Del Monte advisor, Barclays Pic, had a conflict of interest in handling the deal since it also assisted in financing the buyout group’s offer. The private equity consortium includes Vestar Capital Partners and Centerview Partners.
October filings with the Securities and Exchanges Commission indicate Barclays Capital and Del Monte Foods will split a $89.4 million payment by sending $23.7 million and $65.7 million respectively to Del Monte Foods shareholders. With the settlement, both companies denied all wrongdoing.
The plaintiffs’ lawyers, Grant & Eisenhofer, posted the following to their website: “the lawsuit, which challenged the common practice by many deal advisers to simultaneously offer sell-side financing in a transaction, led to sweeping changes in the way investment banks conduct business in the M&A marketplace.”
Reports reveal that holders of about 149.8 million shares of Del Monte voted in favor of the deal, while 1.6 million shares voted against. Learn more about the lawsuit here.
Del Monte rose less than 1 cent to $19 at 2:25 p.m. today in New York Stock Exchange composite trading. Holders of about 149.8 million shares of Del Monte voted in favor of the deal, while 1.6 million shares voted against, according to the statement.
Private-equity firms are ramping up acquisitions as credit for deals becomes available from banks and investors snap up high-yield bonds used to finance the transactions. KKR co- founder Henry Kravis said last week that low interest rates are pushing financial institutions and pension funds to buy riskier assets because they are looking for better returns.
Buyout managers have announced $27.7 billion in deals so far this year, more than double last year’s total during the same period, Bloomberg data show. Private-equity firms pool investors’ money to take over companies, financing the purchase with mostly debt, with the intention of selling them later for a profit.
Kravis and George Roberts created KKR in 1976 and have expanded the firm to oversee about $61 billion in assets. In addition to private equity, the firm manages debt investments and offers underwriting services.
To contact the reporter on this story: Jason Kelly in New York at email@example.com