Harbinger Agrees To $3.7M Settlement In Stock
Deal Suit
By Ben
Conarck
LLaw360, Wilmington (June 26,
2015, 5:38 PM ET) -- Hedge fund manager Philip Falcone’s Harbinger Capital
Partners LLC has agreed to pay $3.7 million to settle derivative claims
that he orchestrated an unfair stock exchange between
HCP and
Harbinger Group Inc., a publicly traded firm under its control,
according to Friday filings in Delaware Chancery Court.
In a Friday letter to Vice Chancellor John W. Noble, counsel for HGI
shareholder Alan Kahn said that all parties have agreed to a settlement in
principle as outlined in a memorandum of understanding. The MOU does not
contain any admissions of wrongdoing.
Kahn, who
filed the suit in 2010, had gone after the agreement
struck between HGI’s board of directors, including Falcone, and the small
holding company it allowed to acquire some of HCP’s shares in
Spectrum Brands Holdings Inc., a consumer products company that sells
household appliances and pet supplies.
“The settlement is subject (among other things) to confirmatory discovery,
the drafting of definitive documentation, notice and court approval,”
Kahn’s counsel Jessica Zeldin of
Rosenthal Monhait & Goddess PA said in the letter. “The parties have
undertaken in the MOU to use their best efforts to complete the
confirmatory depositions in 45 days and execute a stipulation of
settlement 14 days thereafter.”
HGI announced the deal at issue in September 2010, saying it would issue
nearly 120 million shares of company stock to HCP in exchange for nearly
28 million shares of Spectrum Brands stock owned by HCP. The suit claimed
HGI was “vastly overpaying” for the acquisition of assets from HCP, and
that the transaction would boost HCP’s stake in HGI from 51.6 percent to
93.3 percent.
“As a result of the Spectrum Brands exchange, HCP will also receive a
valuable benefit in its ability to effect a short-form merger without
prior notice to or action by any other HGI shareholder,” the complaint
said.
According to the memorandum of understanding, the parties had engaged in
discovery after defendants filed answers to the complaint in November
2011, and eventually, despite failed efforts to resolve the action,
mediation talks sprung back to life in March 2015.
Defendants in the action include Falcone, HCP, and directors Lawrence
Clark Jr., Peter Jenson and Keith Hladek. The memorandum said that each
defendant has denied and continues to deny “that he or it breached any
fiduciary duty or otherwise engaged in any of the wrongful acts alleged in
this action,” and stressed that the defendants are entering into the
agreement “solely to eliminate the burden, expense and uncertainties of
further litigation.”
In the letter, Zelden requested on behalf of all parties that in the
meantime the case schedule be vacated.
An HGI representative declined to comment, and counsel for Kahn did not
immediately return a request for comment on Friday.
Kahn is represented by Jessica Zeldin of Rosenthal Monhait & Goddess PA.
The defendants are represented by Stephen P. Lamb and Meghan M. Dougherty
of
Paul Weiss Rifkind Wharton & Garrison LLP.
The case is Alan Kahn v. Philip A. Falcone et al., case number CA6088, in
the Court of Chancery of the State of Delaware.
--Editing by Mark Lebetkin.
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