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JPMorgan Sues American Century Over $848 Million Share Sale

Sept. 22 (Bloomberg) -- JPMorgan Chase & Co. sued mutual fund firm American Century Cos. over claims it was shortchanged in an $848 million optioned-share sale to Canadian Imperial Bank of Commerce.

American Century failed to disclose material information regarding the sale and the shares weren’t purchased at their fair market value, lawyers for JPMorgan said in a public version of the complaint filed yesterday in Delaware Chancery Court. The complaint was initially filed under seal.

“The allegation that American Century breached an option agreement is without merit and the edited complaint filed in Delaware yesterday is an inaccurate and incomplete representation of the facts,” American Century said in a statement e-mailed by Chris Doyle, a spokesman for the firm.

CIBC, Canada’s fifth-largest bank, announced in July that it agreed to buy a 41 percent stake in American Century from JPMorgan. The cash acquisition is the third-largest purchase by the Toronto-based bank.

JPMorgan purchased a roughly 45 percent interest in Kansas City, Missouri-based American Century for about $900 million in January 1998, according to the complaint. Under a 2009 option agreement between American and JPMorgan, American could buy all of the shares JPMorgan owned in the firm and resell them to a third party.

JPMorgan, based in New York, said in its complaint that it learned of the share sale through a public announcement. The transaction was completed on Aug. 31.

Withheld Information

“American Century improperly withheld information regarding the CIBC stock sale from JPMorgan’s director designee on American Century’s board,” lawyers for the bank said in the redacted complaint.

American Century “understated its financial position” to an independent adviser, causing a report that served as the basis for the share repurchase to understate the firm’s fair market value, according to the complaint.

JPMorgan is seeking a trial to determine unspecified damages.

American Century accused JPMorgan of filing the complaint as a “tactical reaction to an adverse result” in another matter recently concluded in favor of the firm. Doyle declined to identify that matter.

“The heavily edited complaint removes information that reflects negatively on JPMorgan’s conduct in the other matter,” American Century said in the statement. “We believe that the information JPM removed from the complaint is not confidential and we will soon be taking appropriate action to have the redacted information unsealed.”

The case is JPMorgan Chase & Co. v. American Century Companies Inc., CA6875, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: {Sophia Pearson} in Wilmington at spearson3@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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