A shareholder of $10.2 billion market cap Biomet Inc. has sued would-be buyers
The lawsuit, filed in the state Supreme Court in Manhattan by William Gervasio on behalf of shareholders, makes claims typical of lawsuits that involve LBO firms buying publicly traded companies, said sources. The board committed “willful, reckless and wanton violations” of the fiduciary duties, according to the suit. The Jan. 2 suit also claims that the board failed to sell for an adequate price, failed to shop the company well enough and failed to disclose adequate information to shareholders about the company’s financial status.
The shareholder’s law firm is boutique class action specialist Lerach Coughlin Stoia Geller Rudman & Robbins. Lerach Coughlin was also behind one of a handful of class action lawsuits against largest-buyout-ever HCA Inc. and its consortium buying group, claiming that the $33 billion deal was too cheap. In December, Lerach Coughlin made news on a few class action suits against health care companies: it filed against medical device maker Atricure, which IPO’d last year and whose stock has dropped; it also won a payout for shareholders of fraud-plagued HealthSouth.
Although the Biomet lawsuit appears standard issue, it comes at an interesting time. This fall, the Department of Justice began a probe of private equity firms and whether buyout firms collude on their transactions to reduce pricing, though at least one source at an LBO firm denied any connection between the probe and these types of lawsuits.
The buyout firms either could not be reached or declined comment. A Biomet spokeswoman declined comment. Lerach Coughlin attorney David Rosenfeld did not immediately return a call.
One source close to one of the sued LBO shops called Lerach Coughlin and law firms like them “ambulance chasers.” He added, “This is happening more and more. Every time there’s a public-to-private, there’s a spate of law suits flying around.”
Suits like this one involving take-privates “come 99 out of 100 times and are settle 95 out of 100 times,” said Nixon Peabody private equity partner Dom DeChiara. Though unfamiliar with the Biomet suit, DeChiara added that the plaintiff is seeking a settlement payment and ideally a boost in the price of the transaction.
Warsaw, Ind.-based Biomet designs surgical products. Biomet agreed to sell to the LBO consortium for $44 per share, or $10.9 billion, in December. If completed, it will be the second largest health care LBO after HCA.
Biomet is facing one other shareholder lawsuit, led by law firm Stull, Stull & Brody. The suit accuses prior officers and directors of manipulating prices of stock option grants.—M.C.