MoneyGram International Inc. (MGI), a money-transfer provider, was sued by a shareholder claiming that a recapitalization agreement with affiliates of Thomas H. Lee Partners LP and Goldman Sachs Group Inc. (GS) is “grossly unfair.”
The plan, which would allow controlling investors to cash out about 29 percent of their $760 million cash investment in the company’s preferred stock, was challenged by shareholder Willie R. Pittman in a complaint in Delaware Chancery Court in Wilmington. Pittman seeks to block the plan.
“The common stockholders will suffer substantial cash value dilution and voting power dilution through their reduced continuing interest in a much more highly leveraged company,” lawyers for Pittman said in the complaint made public today.
MoneyGram said in March that, as part of the plan, Goldman Sachs would receive $77.5 million in cash and additional preferred shares that may be equal to a 30 percent equity stake if converted to common stock. Thomas H. Lee Partners, a Boston- based private-equity firm, and its co-investors would get $140.8 million in cash and own about 55 percent of the common shares.
A special committee appointed by MoneyGram’s board of directors failed to act with independence and was guided by “conflicted and uninformed advisers,” lawyers for Pittman said in the complaint.
“That adviser provided no fairness opinion, and its financial analysis, particularly its flawed valuation of the preferred stock, was inconsistent with the limited contractual rights of the preferred stock and contrary to Delaware law,” according to the complaint.
Lynda Michielutti, a spokeswoman for MoneyGram, didn’t immediately reply to a phone call and e-mail seeking comment.
Minneapolis-based MoneyGram is the second-largest money- transfer company after Western Union Co. The company sold preferred stock to THL and Goldman Sachs in 2008 after reporting declines in investments linked to the U.S. housing market.
The case is Pittman v. Clark, CA6387, Delaware Chancery Court (Wilmington).
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