WILMINGTON, Del. The Delaware Chancery Court has dismissed a shareholder suit claiming billionaire financier Ronald Perelman, owner of MacAndrews & Forbes Worldwide, shortchanged other shareholders of M&F Worldwide when he bought the M&F Worldwide shares he did not own and took the parent of check printing giant Harland Clarke private in 2011.
M&F also owns Harland Financial Solutions and Scantron, the leading provider of online school testing services.
Attorneys for Perelman argued for summary judgment in the case, saying the judge need only defer to the board’s business judgment on the deal, rather than forcing the company to prove the transaction’s “entire fairness,” a more stringent standard. Judge Leo Strine agreed and ordered a summary judgment in Perelman’s favor. “This court determines that on the conditions employed in connection with MacAndrews & Forbes’s acquisition by merger of MFW, the business judgment rule,” wrote Judge Strine.
The going private merger, which came as the check business is diminishing, is one of several major takeovers that have helped remake the vendor landscape for credit unions and banks over the past few years, including other going private transactions for First Data Corp. and Open Solutions Inc. In the M&F deal, Perelman, the well-known Wall Street dealmaker, first rolled up check printers Clarke American, then John H. Harland Co., to create the country’s biggest check printer under the umbrella of M&F Worldwide, of which Perelman’s private holding company MacAndrews & Forbes owned a controlling 43% stake.
Outside shareholders in the case argued that Perelman took advantage of a temporary lull in the stock market to buy up the remaining shares of M&F on the cheap. Beginning in June 2011, several M&F shareholders sued over the $24-per-share deal, which later was upped to $25 per share, representing a 47% premium. The shareholders argued the M&F board, which rendered a fairness opinion on the Perelman offer, was constructed of Perelman cronies who were incapable of offering an unbiased opinion on the deal. It also made it impossible for the board to entertain competing bids, shareholders alleged.
The shareholders’ claims came after M&F’s stock surged upon announcement of the deal from $16.77 to $24.20, just below the eventual $25 buyout price, but a 22% discount to its 52-week high of $30.77.
Though Perelman’s privately owned MacAndrews & Forbes held a minority 43% stake in M&F, the billionaire wields effective control of the publicly owned company through affiliated directors who make up a majority of its board, the ability to hand-pick the remaining directors and a management services agreement that gives Perelman control over the company’s officers, the outside shareholders argue. The CEO of M&F, Barry Schwartz, for example, also was executive vice president of MacAndrews & Forbes. Perelman’s stranglehold on MFW “makes it unlikely that any special committee would render an independent decision on the deal,” their suit claims.
Perelman is known as one of the most savvy dealmakers on Wall Street and is famous for takeovers of cosmetics company Revlon, comic book company Marvel Entertainment, outdoor sporting goods manufacturer Coleman Co., and appliance maker Sunbeam Products, among others.
