Del Monte, In DOJ Probe, Settles With Shareholders

A judge approved an $89.4 million settlement for shareholders of Del Monte, who claimed they were shortchanged in the food company’s sale to private equity investors led by Kohlberg Kravis Roberts & Co., sister news service Reuters reported. Delaware Chancery Court judge Travis Laster overruled an objection by a Cleveland pipe fitters union pension fund, which had sought to opt out of the settlement to pursue a similar lawsuit in a California federal court.

The settlement is one of the five biggest cash payments awarded in such shareholder litigation by the Chancery Court, which is one of the country’s most active for shareholder lawsuits. Laster also approved fees for shareholders’ attorneys, led by the Grant & Eisenhofer firm, of about $22 million.

KKR bought Del Monte earlier this year, but only after Laster delayed a shareholder vote, accusing Del Monte’s adviser, Barclays plc’s Barclays Capital, of manipulating the sales process to collect a large financing fee. Barclays and Del Monte will contribute to the settlement.

While the judge’s ruling will end all private litigation stemming from the deal, it does not affect a Department of Justice antitrust investigation. The department’s antitrust division “has been investigating the facts and circumstances surrounding the sale of Del Monte,” Stuart Grant, a lawyer for Del Monte shareholders, wrote in a November 23 court filing. He said he has provided documents to the division and is cooperating with the investigation. Del Monte and KKR have said that the U.S. Securities and Exchange Commission had issued subpoenas for documents relating to the buyout.

Grant in an interview said the Justice Department did not identify a specific target of its investigation. In court papers, he mentioned the probe as part of a discussion of antitrust claims against KKR.

“It wouldn’t surprise me if they were looking for more information on what might be collusive bid-rigging,” said Craig Wildfang, a lawyer who had been involved in the shareholders’ lawsuit, referring to the Justice Department probe.

KKR has been involved in antitrust investigations before, having in 2006 and 2009 provided documents to the Justice Department as part of a government investigation into private equity firms, according to securities filings. KKR and several other private equity firms are also defendants in a 2007 Massachusetts federal lawsuit. They are accused of colluding to lower the purchase prices of leveraged buyout targets such as software company SunGard Data Systems Inc. and food service provider Aramark Corp.

(Tom Hals is a correspondent for Reuters in Wilmington, Del.)