A shareholder of Indianapolis-based Fortune Industries Inc. has dropped a lawsuit that sought to stop a proposed buyout of the company.
Mark Haagen filed suit against Fortune Industries in April and sought class-action status on behalf of certain shareholders, charging that the price offered for each share in the company was too low.
A sale of the publicly traded professional employer organization by Carter M. Fortune, chairman and majority shareholder, will result in the company's going private.
Fortune Industries is set to be purchased by CEP Inc., a holding company led by company 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.
Terms announced in March 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 currently are fetching just 15 cents each, but had been priced as high as 90 cents apiece in the 12 months leading up to the sale announcement in March.
Haagen claimed 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.”
But Haagen withdrew his complaint last week after lawyers for Fortune Industries argued that Haagen is barred by the state’s dissenters’ rights statute from bringing a case, and cannot seek damages because the transaction has not been completed.
“In summary, the Indiana General Assembly has determined that minority shareholders are not permitted to interfere with the will of the majority with respect to key corporate transactions,” said Paul Vink, a partner at Indianapolis-based Bose McKinney & Evans LLP, in a court document.
“Were it not so, Indiana corporations could be held hostage by minority shareholders who wield the power to stymie corporate action with which they disagree,” he continued. “Corporate paralysis would ensue.”
Haagen wanted a judge to stop the transaction or, if the sale is completed, to award plaintiffs damages based on charges that executives and directors breached their fiduciary duty by approving the purchase.
Haagen was represented locally by Indianapolis law firm Cohen & Malad LLP, which has built a national reputation representing plaintiffs in class-action disputes. A call to lawyer Richard Shevitz on Friday was not returned.