Risk Management

Car Auctioneer, Shareholders Strike Deal

Class-action lawsuit had alleged that a planned acquisition did not maximize shareholder value.
Stephen TaubMarch 12, 2007

Adesa, which conducts wholesale vehicle auctions and related services, announced that it has settled a shareholder class action lawsuit regarding its proposed merger with a number of private equity and hedge funds.

Last December, Adesa agreed to a merger with KAR Acquisition, an indirect subsidiary of KAR Holdings II, which in turn is controlled by a group of private equity funds consisting of Kelso, GS Capital Partners (an affiliate of Goldman Sachs), ValueAct Capital Master Fund, and Parthenon Investors.

The deal is valued at $3 billion, including the assumption of about $700 million in debt.

A month later, shareholders filed a lawsuit in Delaware’s Chancery Court against Adesa, its directors, and the acquiring funds. In part, the lawsuit alleged that directors failed in their fiduciary duty to maximize shareholder value, reported the Associated Press.

In a statement on the proposed deal with shareholders, Adesa stressed that the company and the acquiring equity funds continue to deny all allegations of wrongdoing and that it is settling to “eliminate the distraction, burden and expense of further litigation.”

The settlement, which would not affect the planned acquisition, according to Adesa, would resolve all claims relating to the merger, the merger agreement, and any related disclosures. Adesa would amend its proxy to include certain additional disclosures, and the company or its successor would pay up to $340,000 for fees and expenses incurred by the plaintiffs.

The settlement is subject to court approval.