Outerwall Investor Wants Records After $1.6B
Apollo Deal
By Chelsea
Naso
Law360, Wilmington (September
22, 2016, 1:18 PM EDT) -- An
Outerwall Inc. investor on Thursday sued the operator of
Redbox movie rental kiosks in Delaware state court for access to
company records to investigate potential misconduct in connection with
Outerwall’s $1.6 billion acquisition by
Apollo Global Management LLC affiliates.
Dean Dal Ben said in a complaint that he was denied a bid to inspect
company documents, such as those prepared by Outerwall’s board of
directors in connection with the
Apollo deal. Under Delaware law, Dal Ben has the right to
inspect the requested materials to investigate allegations that
Outerwall’s board breached its fiduciary duty in connection with
post-merger employment deals and that valuations by
Morgan Stanley and others were not properly disclosed, he said.
“Plaintiff is permitted to apply to this court for an order compelling
inspection of Outerwall’s corporate books and records because Outerwall
has wrongfully refused to permit inspection,” Dal Ben said in the
complaint.
The deal, which was first announced in July, will see the Apollo funds
acquire all outstanding shares of Outerwall common stock for $52 apiece.
The per-share price represents a 51 percent premium over the company’s
closing stock price on March 14, which was the last day before Outerwall’s
board announced it was exploring options for the company.
According to Dal Ben, members of Outerwall’s management, including CEO
Erik Prusch, secured jobs in the post-merger company, prompting the need
for a closer look.
“This benefit of maintaining employment interests in the post-merger,
private company contaminated the process with virtually no oversight or
direction from the company’s board — other than to sell,” Dal Ben said.
Additionally, Dal Ben said valuations of the company performed by Morgan
Stanley, such as a comparable companies analysis, may not have been
properly disclosed to investors.
A representative for Outerwall declined to comment on Thursday.
In addition to Redbox, Outerwall operates Coinstar machines. The company
also runs an ecoATM business that allows customers to use kiosks to sell
old tech devices such as cellphones and tablets for cash.
Dal Ben is represented by Jessica Zeldin of
Rosenthal Monhait & Goddess PA and Carl L. Stine and Fei-Lu Qian of
Wolf Popper LLP.
Counsel information for Outerwall was unavailable on Thursday.
The case is Dal Ben v. Outerwall Inc., case number unavailable, in the
Court of Chancery of the State of Delaware.
--Additional reporting by Benjamin Horney. Editing by Kelly Duncan.
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