The acquisition of Milwaukee-based Joy Global Inc. by Komatsu faces a legal challenge by a shareholder arguing the deal is “fundamentally unfair” to shareholders.
Bayohle Oduntan, a Joy shareholder, filed the lawsuit in the U.S. District Court for the Eastern District of Wisconsin earlier this week. The suit names the company, several executives and board members and was filed as a class action.
In a Securities and Exchange Commission filing made earlier this month, Joy revealed Komatsu initially offered $17 per share for the company. Joy didn’t counter the offer, but Komatsu continued to increase the price until Joy suggested $28 per share, to which Komatsu agreed. The company’s share price increased over the first half of the year and Joy’s board sought to increase the price in the days before the deal was announced. Komatsu eventually agreed to $28.30 per share.
The filing also shows that Joy opted against reaching out to any other companies about a potential deal, believing Komatsu was the best partner and fearing a potential leak.
The suit alleges that the deal undervalues Joy Global, citing a BizTimes Milwaukee story in which analyst Robert W. Baird & Co. Mircea Dobre said $40 per share would be a better target. The suit also says Joy should have reached out to other companies about a potential sale and failed to disclose a potential conflict of interest between Joy, Komatsu and Goldman Sachs, which provided Joy with financial opinions on the deal.
Oduntan is seeking to block the company from providing a definitive proxy statement until additional information he requests is included. He is also asking a judge to block any shareholder vote until that information is included, along with awarding other damages.
