Shareholder Scrutinizes Acquisition of Sanderson Farms in SDNY Lawsuit

A suit filed last Friday seeks to halt the acquisition of integrated poultry processing company Sanderson Farms by Cargill Meat Solutions Corporation and the Continental Grain Company and their affiliates until shareholders are provided with the information needed to make an informed vote on the matter. According to the complaint, the proxy statement accompanying the $4.53 billion proposed transaction is materially incomplete and contains misleading representations.

The lawsuit explains that Laurel, Mississippi-based Sanderson is a company that produces, processes, advertises, and distributes fresh, frozen, and prepared chicken products across the country. On August 9, Sanderson and the prospective buyers jointly announced the proposed transaction, wherein Cargill and Continental will buy Sanderson for $203 per share in cash. According to the announcement reprinted in the complaint, this figure represents more than a 30% premium to Sanderson’s unaffected share price of $155.74 on June 18, the last full trading day prior to media speculation about the potential sale.

The shareholder alleges that Sanderson and its board of directors caused the incomplete and inaccurate proxy statement to be filed with the Securities and Exchange Commission on September 3. Specifically, the plaintiff takes issue with information concerning Sanderson’s financial forecasts and financial analyses conducted by advisor Centerview Partners LLC.

The lawsuit claims that the proxy statement provides values for non-GAAP (Generally Accepted Accounting Principles) financial metrics, “but fails to provide line items used to calculate these metrics and/or a reconciliation of these non-GAAP metrics to their most comparable GAAP measures.” The complaint also points to several allegedly problematic analyses performed by Centerview, including its “Analyst Price Target Analysis.” The proxy statement purportedly needed to disclose the stock price targets for the shares of Sanderson common stock as well as which Wall Street research analysts were “observed” for purposes of the computation, the filing says.

According to the complaint, the withheld material must be disclosed so that stockholders can make an educated vote. The lawsuit seeks to halt the transaction until the requested disclosures are made. The plaintiff, represented by Melwani & Chan LLP, also seeks his attorneys’ fees and costs.