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Duff & Phelps Sued by Investor Over Carlyle Buyout Bid

Duff & Phelps Corp. was sued by a shareholder over a proposed $665.5 million acquisition of the investment bank by Carlyle Group LP and investors including Swiss bank Pictet & Cie.

The lawsuit was filed yesterday in New York State Supreme Court in Manhattan by Thomas Rutkowski, who said he holds 2,000 shares of Duff & Phelps. Rutkowski said in the complaint that the proposed acquisition is “grossly inadequate” for shareholders and asked the court to stop the purchase from proceeding.

The buyers, which also include Stone Point Capital LLC and Geneva-based Edmond de Rothschild Group, agreed to pay $15.55 a share, 19 percent more than Duff & Phelps’s closing price on Dec. 28. The transaction is expected to be completed in the first half of the year, the companies said in a statement on Dec. 30.

The buyers will help New York-based Duff & Phelps continue its international expansion, according to the statement. Revenue at the 80-year-old company, which also provides financial-advisory services, was predicted to rise 17 percent by end of 2012 to $465.8 million, the average of analysts’ estimates compiled by Bloomberg.

Alex Wolfe, a spokesman for New York-based Duff & Phelps, and Christopher Ullman, a spokesman for Washington-based Carlyle Group, declined to comment on the lawsuit in telephone interviews.

Merger Agreement

The merger agreement contains a provision that restricts Duff & Phelps from initiating, soliciting or encouraging inquiries or negotiations about alternative proposals and can only consider unsolicited proposals if the board determines its fiduciary duties require it to do so, according to the lawsuit.

The agreement also reduces the possibility of a better, unsolicited offer because the defendants agreed to provide information to the companies that proposed the acquisition that allowed them to match any other offer, according to the suit.

The pact also contains a provision calling for Duff & Phelps to pay a $6.7 million termination fee to the acquiring companies, along with a $1.25 million expense reimbursement, if the agreement is terminated under certain circumstances, according to the lawsuit.

“The termination fee payable under this provision is an amount that will make the company that much more expensive to acquire for potential purchasers, while resulting in a corresponding decline in the amount of consideration payable to Duff & Phelps’s shareholders,” Rutowski alleged in the suit.

The case is Rutkowski v. Gottdiener, 650144/2013, New York State Supreme Court, New York County (Manhattan).

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