March 21 (Bloomberg) -- Midas Inc., the operator of car service centers, was sued by a shareholder claiming the offer of about $173 million for the company by tire supplier TBC Corp. is “inadequate.”
The bid undervalues the company given its improving sales trends and a strategy to co-brand its Midas and SpeeDee shops, the shareholder, Glenn Freedman, said in the complaint filed today in Delaware Chancery Court. Freedman is seeking to represent all shareholders of Itasca, Illinois-based Midas and obtain a court order barring the transaction.
“The proposed transaction is wrongful, unfair and harmful to Midas public shareholders,” Freedman said in the complaint.
Midas, which has more than 2,250 franchised, licensed and company-owned namesake stores in 14 countries, announced March 13 that it accepted Palm Beach Gardens, Florida-based TBC’s cash offer of $11.50 a share. The deal also includes the assumption of $137 million in debt and pension liabilities by TBC.
Midas directors acted in their own self-interest at the expense of shareholders, Freedman said in the complaint. The same day the board approved the proposed transaction, it also rewarded Chief Executive Officer Alan Feldman for supporting the deal by approving favorable terms in the annual incentive compensation plan, according to Freedman. Under those terms, Feldman is entitled to a bonus of as much as 90 percent of his annual base salary, Freedman said in the filing.
JPMorgan Chase & Co., which served as Midas’s financial adviser, was unable to provide “independent, disinterested financial advice” to the company because of its affiliation with TBC parent Sumitomo Corp., Freedman said in his complaint.
JPMorgan has disclosed that it owns 1 percent or more of Tokyo-based Sumitomo Mitsui Financial Group Inc. securities and has performed and received compensation from that company for both investment banking and non-investment banking services, Freedman said in the complaint. JPMorgan wasn’t named as a defendant in the case.
Bob Troyer, a spokesman for Midas, didn’t immediately return a phone call seeking comment on the complaint. Jennifer Zuccarelli, a JPMorgan spokeswoman, also didn’t return a phone call and e-mail seeking comment on the claims.
The case is Freedman v. Midas Inc., CA7346, Delaware Chancery Court (Wilmington).
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