Investor moves to block Tyson, AdvancePierre deal

by Erica Shaffer
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Alleged irregularities in securities filings lead to a lawsuit.
 
KANSAS CITY, Mo. – A lawsuit filed by an investor with Cincinnati, Ohio-based AdvancePierre Foods Inc. claims that, among other things, AdvancePierre failed to adequately disclose material information that investors need to make a fully informed decision whether to support the deal. The plaintiff, Stephen Bushansky, is asking the US District Court for the Southern District of Ohio to block proposed transaction.

Springdale, Arkansas-based Tyson Foods Inc. announced in April that the company entered into an agreement to acquire AdvancePierre Foods in a transaction valued at approximately $4.3 billion. Terms of the agreement involve an offer of $40.25 per share in cash to the holders of AdvancePierre Foods stock. The offer price represents a 31.8 percent premium to AdvancePierre’s closing price on April 5, 2017. The total value of the transaction includes $3.2 billion in equity value and the assumption of $1.1 billion in AdvancePierre Foods debt.

Court documents state that AdvancePierre’s recommendation that stockholders tender their shares in favor of the acquisition omits material information concerning:

  • AdvancePierre’s financial projections, relied upon by AdvancePierre’s financial advisors, Credit Suisse Securities (USA) LLC and Moelis & Co. LLC in connection with rendering their fairness opinions;
  • the data and inputs underlying the financial valuation analyses that support the fairness opinions provided by Credit Suisse and Moelis; and
  • the background process leading to the proposed transaction.

The  complaint also states that the AdvancePierre board “… and the company’s executive officers are conflicted because they will have secured unique benefits for themselves from the Proposed Transaction not available to Plaintiff and the public stockholders of AdvancePierre.”

At issue is an agreement AdvancePierre entered in connection with the company’s initial public offering (IPO) which occurred in July 2016. Under the terms of that agreement, pre-IPO stockholders would be entitled to 85 percent of the relevant tax benefits that the post-IPO company received, and the payments under the agreement would be accelerated in the form of substantial lump sum payments in the event of change of control.  The settlement amount under that agreement, according to court documents, was valued at approximately $200 million.

“Company insiders stand to reap a substantial financial windfall for securing the deal with Tyson,” according to the complaint. Court documents state that John N. Simons Jr., a former president and CEO of the company who owns 1,483,757 shares, stands to gain more than $59.7 million upon tendering his shares.

The case is Bushansky v. Advancepierre Foods, Inc. et al, U.S. District Court, Southern District of Ohio, No. 1:17-cv-00326.

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