Score one for Skechers Inc.
A California federal district court judge in Los Angeles has ruled against a pension plan investor’s bid for a preliminary injunction to delay the closing of the planned acquisition of Skechers by 3G Capital.
The $9 billion go-private deal with Brazilian private-equity firm 3G Capital is the biggest shoe buyout in history, and the footwear company had already received antitrust clearance from the Federal Trade Commission. But the Key West Police Officers & Firefighters Retirement Plan (Key West) had an issue with the transaction and wanted to delay its closing on the ground that it didn’t want to be forced to choose between two different shareholder elections without more information.
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The deal structure has one election at $63 a share and the other at $57 a share in cash and one unlisted, non-transferable equity unit in a newly formed entity that will become the parent of Skechers upon the closing of the transaction. Key West filed its lawsuit in May and a month later sought a preliminary injunction.
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Named as defendants were Skechers and members of the founding family — company founder, chairman and CEO Robert Greenberg and the firm’s president, his son Michael Greenberg. The Greenberg family, which is also the controlling stakeholder and will retain a minority stake, has been involved in the business for the last three decades, and both father and son will continue to oversee operations post-acquisition, along with other members of current management.
On Friday, U.S. District Court Judge Percy Anderson ruled against Key West, finding that it failed to establish it would likely suffer irreparable harm in the absence of preliminary relief.
The court found that the required filing statement and 3G’s prospectus for the offer of equity consideration contained background information regarding merger talks — detailing 3G’s approach, the lack of other bidders and the Skechers’ board deliberations — as well as the formation of a committee of independent directors to negotiate and approve or disapprove the deal. It also included a fairness opinion obtained by Skechers from its financial adviser Greenhill & Co., among other matters that also went into detail about financial data, projections and risk factors to inform stockholders’ decision-making, according to the minutes of an in-chamber meeting last Thursday.
The court noted certain legal requirements in connection with Key West’s request for a preliminary injunction. It also said that even if Key West were able to show that it was deprived of material information in connection with its election options, it still failed to show that its “injury could not be remedied by an award of damages.” The court also noted another judicial decision that essentially found that plaintiffs who “have adequate remedies of law, such as money damages, are precluded from seeking injunctive relief.”
Judge Anderson noted in the meeting minutes that the review process by the Securities and Exchange Commission is still in progress and a closing date for the Skechers-3G transaction hasn’t been set.
When the deal was announced in May, the expectation then was that a closing date likely would be in the third quarter.
The footwear firm will remain headquartered in its hometown of Manhattan Beach, Calif. and its current management team will continue to steer the company.
Skechers in April posted first-quarter net earnings of $202.4 million on net sales of $2.41 billion. That compares with net earnings of $206.6 million on net sales of $2.25 billion in the same year-ago period.