Heinz Wins Ruling Throwing Out Investor Suits Over Buyout
HJ Heinz Co. (HNZ) won a judge’s ruling throwing out lawsuits brought by investors seeking to block the $23 billion buyout of the company by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) and Jorge Paulo Lemann’s 3G Capital.
The decision by Pennsylvania state court judge Christine Ward clears the way for a shareholder vote today on the purchase. Nine shareholder lawsuits had been filed before Ward challenging the proposed merger. Three complaints filed in federal court were voluntarily dismissed earlier this month.
“We are pleased with today’s decision and we look forward to tomorrow’s special shareholder meeting where we expect Heinz shareholders to overwhelmingly approve this historic transaction and its record valuation of Heinz,” Michael Mullen, a spokesman for the company, said yesterday in an e-mailed statement.
Berkshire and 3G agreed in February to buy Heinz for $72.50 a share, ending the independence of the Pittsburgh-based maker of condiments and Ore-Ida potato snacks. The investors said April 11 that Bernardo Hees, chief executive officer of Burger King Worldwide Inc. (BKW), will head Heinz after the acquisition. 3G acquired Burger King in 2010 and took the fast-food chain public last year.
Heinz shareholders served eight demand letters on the company requesting the board investigate or challenge alleged breaches of fiduciary duty in connection with the proposed deal, according to court papers. Heinz created a special litigation committee of four outside directors in March to investigate the claims.
The committee, which filed a report on its findings under seal with the court, determined that “it is not in best interest of Heinz to pursue the claims in the demands and litigations,” according to Ward’s ruling. The committee recommended that the company should request that the cases be terminated, according to the ruling.
Under Pennsylvania corporate law, a company is empowered to make decisions regarding litigation undertaken on behalf of the corporation, Ward said.
“This court is only permitted to examine the Heinz board’s decision to terminate the action in light of the findings of the SLC, and to determine whether the decision was proper,” Ward wrote.
“Decisions regarding litigation by or on behalf of a corporation, including shareholder derivative actions,” Ward said, are within “the province of the board of directors.”
Heinz traces its roots back to 1869 when Henry John Heinz and neighbor L. Clarence Noble began selling grated horseradish, according to the company’s website. It introduced its famous Tomato Ketchup in 1876.
The company said it will retain its corporate headquarters in Pittsburgh. Bill Johnson, who has led the company since 1998, will remain chairman and CEO until the deal is completed.
The cases are In Re H.J. Heinz Co. Derivative and Class Action Litigation, GD 13-003108, Court of Common Pleas of Allegheny County, Pennsylvania (Pittsburgh)
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