|
 Bankers at RBC Capital Markets were so eager to collect higher fees
that they convinced Rural/Metro directors to sell the company in
June 2011 to private equity firm Warburg Pincus LLC at an
unreasonably low $17.25 per share, wrote Vice Chancellor J. Travis
Laster of the Delaware Chancery Court.
Former Rural/Metro Corp shareholders are seeking about $172 million
from Toronto-based RBC, representing the difference between the
buyout price and what they believe the company was worth, according
to published reports.
In a 91-page decision dated March 7, Laster, who presided over a
four-day civil trial in the case last May, said RBC bankers also
concealed their efforts to provide financing to fund the buyout and
other transactions, offering the opportunity for "additional and far
greater" fees that they coveted.
"RBC created the unreasonable process and informational gaps that
led to the board's breach of duty," Laster wrote. "Under the
circumstances, RBC's aiding and abetting of the board's breaches of
fiduciary duty harmed Rural's stockholders."
Given how RBC misled Rural/Metro directors, "this is not a case
where a board's independent sense of the value of the company is
sufficient to carry the day," the judge added.
Laster said he would decide later how much RBC should pay former
Rural/Metro shareholders in damages, including possibly damages for
bad faith.
The decision may make it easier for shareholders to pursue lawsuits
claiming they were short-changed in buyouts.
Delaware is the corporate home of more than half of the largest U.S.
companies, in part because its laws are often considered more
friendly to companies than laws of other states.
"We have reviewed the opinion and are considering our options," RBC
spokeswoman Sanam Heidary said. "This process is not yet over so we
cannot comment further."
Lawyers for the shareholders did not immediately respond on Sunday
to requests for comment.
[to top of second column] |
Last year, Rural/Metro directors and another adviser to the company,
Moelis & Co, agreed to pay a combined $11.6 million to settle
related litigation, without admitting wrongdoing.
In February 2011, Laster delayed a shareholder vote on the buyout of
Del Monte Foods Co by a consortium led by KKR & Co <KKR.N> after
concluding that Barclays Plc's <BARC.L> Barclays Capital unit had a
conflict of interest by advising Del Monte while also providing
financing for the buyers.
Del Monte and Barclays agreed the following October to pay $89.4
million to settle that case.
Founded in 1948, Rural/Metro provides ambulance and fire protection
services in about 700 cities and towns in 21 U.S. states.
The Scottsdale, Arizona-based company filed for bankruptcy
protection in August 2013 after struggling with accounting and
billing problems, including what it called "an acute deficiency of
cash receipts compared with cash expenditures," as well as too much
debt.
It emerged from Chapter 11 protection in December after cutting debt
in half and winning a $135 million infusion from bondholders.
The case is In re: Rural Metro Corp Stockholders Litigation,
Delaware Chancery Court, No. CA-6350.
(Reporting by Jonathan Stempel in New
York; editing by Paul Simao)
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