Interline Brands Inc. (IBI), a distributor of janitorial, plumbing and lighting products that went public in 2004, was sued by an investor contending its purchase by Goldman Sachs Group Inc. (GS)’s private-equity unit and P2 Capital Partners LLC undervalues the company.
Interline board members are selling the company “by means of an unfair process and for an unfair price,” Diane Cohen, the investor, alleged in court papers made public today in Delaware Chancery Court.
Funds managed by GS Capital Partners and P2 Capital are to pay Interline stockholders $25.50 a share. The proposed transaction is valued at $1.1 billion including debt.
Besides selling too cheaply, the directors wrongfully agreed to “certain onerous and preclusive deal protection devices” that discourage other offers, according to Cohen.
The proposed deal contains a provision barring the company from soliciting competing offers and forcing it to end any negotiations with prospective suitors, the investor claims. The funds also have a right to match any higher bids, according to court papers.
Access to Information
“The merger agreement gives the buyout group access to any rival bidder’s information and allows the buyout group a free right to top any superior offer simply by matching it,” lawyers for Cohen wrote.
Interline would pay the buyout group a termination fee of $29.9 million if the company decided to pursue the competing offer, according to court papers. GS Capital Partners and P2 Capital Partners would receive a termination fee of $13.9 million if Interline accepted a better proposal during the so-called go-shop period, according to a May 29 regulatory filing.
The deal would mark Interline’s return to private hands after eight years. Formed as Wilmar Industries in 1978, the company went public in 1996 and was purchased four years later by an investor group including Parthenon Capital LLC, Chase Capital Partners, Chase Manhattan Bank and Sterling Investment Partners LP in a cash deal valued at about $300.8 million. The company raised $187.5 million in its public offering in 2004.
Officials of Interline couldn’t immediately be reached for comment on the suit.
Interline rose 5 cents to $25.15 at 12:20 p.m. in New York trading.
The case is Cohen v. Grebe, CA7622, Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware at email@example.com.