IBJNews

Fortune Industries shareholder seeks to stop proposed sale

Back to TopCommentsE-mailPrintBookmark and Share

A shareholder of Indianapolis-based Fortune Industries Inc. is seeking to stop a proposed management-led buyout that would take the publicly traded professional employer organization private.

Mark Haagen filed a lawsuit against Fortune Industries on April 9 and is seeking class-action status on behalf of certain shareholders, charging that the price offered for each share they own in the company is too low.

Terms of the sale announced March 30 call for shareholders who own 500 shares or fewer to receive 61 cents per share, which Fortune Industries said represents a 22-percent premium over the 200-day moving average share price as of March 20.

Shares of the thinly traded company are fetching 24 cents each but have been priced as high as 90 cents apiece during the past year.

Haagen claims that Fortune Industries, if properly shopped on the open market, would bring a price “materially in excess of the amount offered in the buyout transaction.”

The company is set to be purchased by CEP Inc., a holding company led by Fortune Industries CEO Tena Mayberry and Chief Financial Officer Randy Butler, in a buyout that values the company at $30.5 million. The new ownership would retain the Fortune Industries name.

Carter M. Fortune, the chairman and majority shareholder, would sell CEP his preferred shares, which would be converted to common stock. Upon completion of the stock conversion, total outstanding common stock of the company is expected to exceed 50 million shares.

“The buyout represents an opportunistic effort to free Mr. Fortune from future dealings with Fortune’s public shareholders at a discount from the fair value of their shares,” Haagen charged in the complaint. “The merger price does not represent fair value, and is the product of an inadequate and unfair process, thereby damaging the company’s shareholders.”

The lawsuit filed in Marion Superior Court does not indicate what company stockholders think would be a fair price for Fortune Industries to offer for their shares.

The suit names as defendants Fortune, Mayberry and company directors Paul J. Hayes, David A. Berry and Richard F. Suja, in addition to Fortune Industries and CEP.   

Haagen wants a judge to stop the transaction or, if the sale is completed, to award them damages based on charges that executives and directors breached their fiduciary duty by approving the purchase.

Calls to Fortune’s headquarters at 6402 Corporate Drive on the city’s northwest side were not returned.

Also under the terms of the sale, stockholders of Fortune Industries who own 501 or more shares would receive an equal number of shares in the new company.

Haagen’s lawsuit argues on behalf of those shareholders that they, too, should be compensated for relinquishing control in the company to management.

Shareholders are represented locally by Indianapolis law firm Cohen & Malad LLP, which has built a national reputation representing plaintiffs in class-action disputes. Lead counsel is New York-based Brower Piven.

Including Brower Piven, at least six law firms have released statements since Fortune Industries announced the sale, saying that they’re investigating the transaction on behalf of company shareholders. The firms say the conversion of stock may be unfair to shareholders, as well as the process by which directors considered the transaction.
 
Shareholders of Fortune Industries are set to vote on the transaction after all regulatory conditions are met, including any comments from the Securities and Exchange Commission.

A company executive said in March that directors voted to take Fortune Industries private because it has realized no benefits from being publicly traded and has incurred significant costs complying with federal regulations.

In its last fiscal year ended June 30, Fortune Industries earned $1.3 million on revenue of $64.3 million.

Founded in 2000, the company has shifted its focus the past three years from a diversified holding company to a professional employer organization. It has clients in 47 states.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. PJ - Mall operators like Simon, and most developers/ land owners, establish individual legal entities for each property to avoid having a problem location sink the ship, or simply structure the note to exclude anything but the property acting as collateral. Usually both. The big banks that lend are big boys that know the risks and aren't mad at Simon for forking over the deed and walking away.

  2. Do any of the East side residence think that Macy, JC Penny's and the other national tenants would have letft the mall if they were making money?? I have read several post about how Simon neglected the property but it sounds like the Eastsiders stopped shopping at the mall even when it was full with all of the national retailers that you want to come back to the mall. I used to work at the Dick's at Washington Square and I know for a fact it's the worst performing Dick's in the Indianapolis market. You better start shopping there before it closes also.

  3. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  4. If you only knew....

  5. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

ADVERTISEMENT