Charm Communications Inc., a Chinese advertising company, was sued by a U.S. investor who seeks to block a merger that would take the company private.
Charm last month announced that a buyout group, Engadin Parent Ltd, had offered $4.70 for each of its American depositary receipts. The merger, which Charm accepted, is expected to close before the third quarter.
In a lawsuit filed today in federal court in Manhattan, investor Constantine Pappas claims that He Dang, Charm’s founder and chairman, and other board members breached their fiduciary duty by agreeing to the transaction. Analysts had said each share is worth $5, Pappas said in the complaint.
“The merger is the product of a hopelessly flawed sales process that was designed to ensure the sale of Charm to the buyout group, on terms preferential to the consortium at the expense of plaintiff’s and the company’s other public ADS holders,” Pappas, who lives in Connecticut, said in the complaint.
The suit seeks class-action, or group status on behalf of other investors. Pappas is asking a court to block the transaction.
Dang and the other defendants collectively own about 55.3 percent of the company’s outstanding shares, according to court papers.
Jenny Wang, a spokeswoman for Charm in China, didn’t immediately return an e-mail sent after business hours seeking comment on the complaint.
The suit is Pappas v. Charm Communications, 14-cv-3926, U.S. District Court, Southern District of New York (Manhattan).