This smells like the work of shake-down artists. From today's Napa Valley Register (front page), Napanews.com
Full text below the URL
---Bob
Mondavi sued for not accepting $1.3 billion offer Friday, October 22, 2004
By GABE FRIEDMAN Register Staff Writer
Three class action lawsuits have been filed against the Robert Mondavi Corporation, saying the company's board has acted inappropriately related to this week's $1.3 billion buyout offer from wine industry giant Constellation Brands.
The Mondavi company and its board of directors were sued for not disclosing details of the $1.3 billion offer to shareholders before voting not to accept the offer immediately as the company goes forward with a plan to sell off key assets in Napa Valley and elsewhere.
In two cases, board members are accused of putting their own interests before shareholders. In one of those cases, they are accused of inappropriately structuring the proposed divestiture of assets to favor the Mondavi family and Constellation Brands. Details of the third case were not available at press time.
"It's not surprising," said Hilary Martin, a Mondavi spokeswoman. "We feel strongly that these lawsuits are unmerited and we intend to fight them vigorously."
Two of the suits name as defendants the company and all members of the company's board of directors, including Chairman Ted Hall, family member Marcia Borger Mondavi, and local attorney Frank Farella, as well as Mondavi President and CEO Gregory Evans.
Earlier this year, Mondavi Corporation leaders announced plans to divest the winery's luxury assets, including the Robert Mondavi Winery in Oakville, a half-share of Opus One, three large Napa Valley vineyards and several other properties. The company plans to keep Central Valley winery and vineyards associated with high-volume brands such as Woodbridge. The divestiture of assets was to begin later this year, and Mondavi officials had said publicly the assets to be sold might be worth as much as $500 million, while the overall value of the restructured company would be worth as much as $929 million.
Last week, Constellation Brands approached Mondavi with a $1.3 billion offer for all existing shares. Constellation, which controls several powerful wine and beer brands, offered $53 for common shares, and $61.75 for Class B shares owned by members of the Mondavi family and others. There are approximately 16.5 million shares in Mondavi.
The Mondavi board of directors met Monday and decided not to immediately act on the offer. Officials said they would consider Constellation's bid, but would proceed with the previously announced plan to split the company.
When Mondavi officials disclosed that an offer had been made for all shares, Mondavi stock immediately surged from less than $40 a share to more than $50 on speculation that other bidders might join Constellation. The stock rose 78 cents Thursday to $52.63 a share.
On Tuesday, Constellation released letters from its CEO, Richard Sands, to Mondavi Board Chairman Ted Hall. In the letters, Sands laid out details of Constellation's offer and questioned whether the Mondavi board, in delaying full consideration of the offer, was acting in the best interest of shareholders.
Sands' comments surfaced in at least two of the lawsuits filed this week.
A suit in Napa Superior Court on Tuesday was filed on behalf of Connecticut-based Bamboo Partners, a technology company that is a shareholder in the Mondavi Corporation. Another suit was filed by shareholder Robert Lewis.
Both cases were brought by national law firms that specialize in shareholder lawsuits against corporations. In fact, the firms are descendants of Milberg Weiss Bershad Hynes and Lerach, a controversial firm that has earned several million-dollar-plus settlements, but has also been criticized for bringing cases where there is little evidence of corporate wrongdoing.
"If you look at 100 of these (shareholder) lawsuits, you'll find the same firms over and over," said Andy Demetriou, an attorney with Los Angeles-based Fulbright and Jaworski. "There are times when they've exposed great cases of breaches of fiduciary responsibility and other times when they haven't."
The lawsuit filed on behalf of Bamboo Partners claims the Mondavi directors "have not and are not exercising independent business judgment and have acted and are acting to the detriment" of shareholders.
On the day that Mondavi announced it had rejected an all-cash buyout from an unnamed suitor, stock rose 30 percent to a three-year high. Yet the suit claims the decision regarding Constellation deprived shareholders of "maximum value."
The second lawsuit, filed on Thursday, alleges that the Mondavi board of directors "spent substantial efforts tailoring the structural terms of the acquisition to meet the specific needs of Constellation Brands Inc. and certain members of the Mondavi family."
That suit seeks to stop the acquisition, though the Mondavi Corporation specifically delayed acting on Constellation's offer.
The board, the lawsuit states, "will not supply to Mondavi's minority stockholders sufficient information to enable them to cast informed votes on the proposed acquisition and may consummate the proposed acquisition to the irreparable harm" of the shareholders.
While the cases both allege wrongdoing by board members, in other ways they diverge significantly. Regardless, the cases suggest the Mondavi transaction may become mired in court appearances and legal wrangling.
"I hesitate to say anything is meritless but there doesn't seem to be a lot of substance," said John Hinman, a wine industry attorney in San Francisco who is not involved in the litigation. "The allegations are very general."