As Shakespeare noted, the course of true love never did run smooth. The same, it seems, could be said about going-private transactions.
Earlier this month, Allion Healthcare Inc., represented by Alston & Bird partner Steven L. Pottle, agreed to be acquired in a going-private transaction valued at approximately $278 million.
The Melville, N.Y.-based Allion, a provider of specialty pharmacy and disease management services focused on HIV/AIDS patients, is slated to be sold to an affiliate of HIG Capital, a private investment firm with offices throughout the U.S. and Europe, for about $199 million, plus $79 million in assumed debt.
But just two days after that agreement was announced, on Oct. 20, New York law firm Levi & Korsinsky filed a putative shareholders’ class action against Allion in the Supreme Court of Suffolk County, New York. The supreme court is a state trial court.
The action alleges, among other things, that the price to be paid to holders of Allion common stock is “unfair” because the company is “poised for growth” and its shares are trading at a “huge discount to its intrinsic value.” The purchase price in the sale agreement, $6.60 per share, represents a 30 percent premium over the average price at which the shares traded in the five days preceding the going-private announcement, according to information from Allion.
The suit also alleges, among other things, that the agreement contains a “no shop” provision prohibiting the members of Allion’s board from soliciting competing proposals.
At least two other law firms and a San Diego-based advocacy group, the Shareholders Foundation, Inc., are investigating the agreement.
Pottle called the suit “baloney.” He said it was a standard, plaintiffs’ lawyers’ class action strike based only on information in a press release, given that Allion has not yet filed its proxy.
He said his partner, securities litigator Scott P. Hilsen, will represent Allion in the suit.
Pottle said he did not expect the litigation to delay closing, calling this type of action “fairly customary in a going-private transaction.”
Closing is expected to occur in the first quarter of 2010, subject to regulatory, antitrust and shareholder approvals. The holders of about 41 percent of Allion’s outstanding shares of common stock have signed agreements with HIG to vote in favor of the merger; the company must garner the approval of the holders of a majority of the outstanding shares in order to close the deal.
Pottle said he helped advise the board and a special committee about the sale and their fiduciary duties; he also negotiated the deal. He said he first connected with Allion when he represented the company’s underwriters, Thomas Weisel Partners Group, in Allion’s initial public offering in 2005, and then in a follow-on offering a year later.
In 2008, he said, he represented Allion in what amounted to a “merger of equals” with Biomed America Inc. The transaction was valued at $99.4 million.
In the current deal, Pottle said senior and mezzanine debt financing already have been committed to fund HIG’s purchase of Allion.
HIG, which has some $7.5 billion in capital under management, was represented by Kirkland & Ellis. Raymond James & Associates, which served as financial adviser and dealt with possible strategic partners, was represented by Morrison & Foerster.