Officials with ABB and Baldor Electric Co. have moved to settle out of court three lawsuits filed shortly after ABB announced its intent to acquire Baldor.
Zurich, Switzerland-based ABB announced Nov. 29 the move to acquire Fort Smith-based Baldor in an all-cash $4.2 billion deal expected to close in the first quarter of 2011. The Baldor board unanimously agreed to the deal, and ABB said it will keep the corporate operation in Fort Smith.
Less than 12 hours after the announcement, the New York-based law firm of Bernstein Liebhard LLP announced it would investigate whether the Baldor board of directors “breached its fiduciary duty to its shareholders in agreeing to sell Baldor to ABB Ltd.” Following that, many other law firms announced similar investigations.
A day after ABB announced the deal, John Cottrell hired the Little Rock firm of Emerson Poynter to file a suit in Sebastian County Circuit Court. The filing is a shareholder “class action complaint based upon self dealing and breach of fiduciary duty.” The suit alleges that the $63.50 per share price does not reflect the future higher value of the company.
On Dec. 29, ABB and Baldor signed a memorandum of understanding with attorneys in Cottrell case and two other cases (Fortier and Chance) that would settle the cases, according to documents Baldor filed with the U.S. Securities and Exchange Commission.
The joint statement from ABB and Baldor notes: “While Parent and the Company continue to believe that the lawsuits are entirely without merit and that they have valid defenses to all claims, they have agreed to enter into the settlement in order to avoid the risk that the putative stockholder class actions may delay or otherwise adversely affect the consummation of the Offer and the Merger, and to minimize the expense of defending such actions.”
The settlement will have to be approved by the Sebastian County Circuit Court, and terms of the deal will be shared with Baldor shareholders “prior to final approval of the settlement,” the statement explained.
Not included in the settlement is the Ecker v. Asher case filed in the Circuit Court of St. Louis County, Mo.
“Parent and the Company believe the claims in the Ecker Action are without merit and will continue to defend against the claims in such lawsuit. On December 29, 2010, Parent and Purchaser filed a motion to dismiss or, in the alternative, stay the Ecker Action,” according to the joint statement.
Also, ABB and Baldor have asked the Circuit Court of St. Louis County to transfer and consolidate “all subsequently-filed related actions,” and stay proceedings pending if any. Parent and the Company also requested that the court stay further proceedings until the settlement is reached in the Sebastian County Circuit Court.