Del Frisco’s Facing Stockholder Securities Class Action Over Potential Merger

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Del Frisco’s Restaurant Group, Inc. and several of the company’s directors are facing a proposed securities class action over a stockholder’s concerns regarding a potential merger with equity firm L Catterton. According to the lawsuit, the defendants filed a misleading proxy statement on July 23, 2019, in which they failed to disclose material information about the proposed deal.

Del Frisco’s—a collection of 78 restaurants that includes Del Frisco’s Double Eagle Steakhouse, Del Frisco’s Grille, Barcelona Wine Bar, and bartaco—announced the proposed merger on June 24, 2019, the case says, the terms of which will apparently allow stockholders to receive $8.00 in cash for each share of Del Frisco’s common stock they own.

The plaintiff, a Del Frisco stockholder, takes issue with the proxy statement that was filed almost a month after the announcement of the merger in order to garner shareholder support of the deal, arguing that it left out, among other material details, certain figures that were used in financial advisor Piper Jaffray & Co.’s fairness analyses.

“When a banker’s endorsement of the fairness of a transaction is touted to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed,” the complaint stresses.

Further, the statement, the case says, made no mention of the timing and nature of past services provided by Piper to L Catterton affiliates, the disclosure of which the plaintiff argues is necessary in order to gauge the financial advisor’s potential conflicts of interest.

Finally, the lawsuit claims the proxy statement failed to disclose whether the defendants had any communications with interested parties after sending “standstill waivers” to such parties on June 26 that were meant to bar them from submitting alternate proposals.

The plaintiff argues that the defendants must reveal the allegedly omitted information before stockholders are tasked with voting on whether they support the proposed deal.

“The omissions and false and misleading statements in the Proxy Statement are material in that a reasonable stockholder will consider them important in deciding how to vote on the Proposed Transaction,” the complaint reads. “In addition, a reasonable investor will view a full and accurate disclosure as significantly altering the total mix of information made available in the Proxy Statement and in other information reasonably available to stockholders.”