DOVER, Del. (AP) — A Delaware judge has delayed a shareholder vote on Del Monte Foods Co.'s planned $4 billion acquisition by a group of private equity firms and left the door open to competing bids.
In a ruling dated Monday, Vice Chancellor J. Travis Laster blasted Del Monte's financial adviser, Barclays Capital, saying the investment bank misled Del Monte's board and "secretly and selfishly manipulated the sale process" in order to obtain "lucrative buy-side financing fees."
"On multiple occasions, Barclays protected its own interests by withholding information from the board that could have led Del Monte to retain a different bank, pursue a different alternative, or deny Barclays a buy-side role," Laster wrote in a 56-page opinion dated Monday.
Laster ordered that a shareholder vote that was to have been held Tuesday be delayed for at least 20 days.
He also temporarily halted provisions prohibiting San Francisco-based Del Monte from seeking other offers to compete with the bid from a group led by Kohlberg Kravis Roberts & Co. that is seeking to buy Del Monte for $4 billion in cash and assume $1.3 billion in debt.
Those protective measures include a $120 million termination fee that KKR, which the judge said had "aided and abetted" Barclays in its misconduct, otherwise would receive if a rival buyer submits a "topping bid."
"The likelihood of a topping bid, however, is low," Laster wrote. "With KKR as the buyer and a market check (albeit a tainted one) already completed, a topping bid seems all the less likely. I will not be surprised if no one emerges."
Share's of Del Monte, whose brands include Del Monte, Contadina and College Inn foods, as well as Kibbles 'n Bits, Meow Mix and Milk-Bone pet foods, gained 5 cents to close at $18.94 Tuesday, just below the proposed $19-per-share acquisition price.
In a prepared statement, Barclays said it "strongly disagrees with characterizations that are based on an incomplete factual record."
"Throughout the sales process, we approached 53 potential buyers in an extensive, robust, and public sale that yielded no higher price," read the statement, which also said that the $19-per-share price is higher than the shares have ever traded and represents a 40 percent premium to the average trading price in the three months leading up to the deal.
"Barclays Capital is proud of its role in helping Del Monte achieve that opportunity for Del Monte's shareholders," the statement read.
But Laster cited a series of improper action by Barclays, including not disclosing its behind-the-scenes efforts to put Del Monte into play, and secretly pairing up KKR with Vestar Capital Partners, the highest bidder in a previous round of acquisition talks. That pairing of the two firms, which were joined in the deal by Centerview Partners, violated confidentiality agreements that prohibited Vestar and KKR from discussing a joint bid without written permission from Del Monte, the judge wrote.
Attorneys representing the private equity group did not immediately respond to messages seeking comment Tuesday.
While taking Barclays and KKR to task, the judge did not totally absolve Del Monte's board.
"By failing to provide the serious oversight that would have checked Barclays' misconduct, the directors breached their fiduciary duties,..." he wrote.
The judge nevertheless indicated that the likelihood of holding the company's directors liable for monetary damages was remote.