concerns about board turnover and what they viewed as Linton’s effort to seize control of the company, the plaintiffs say in the suit. In the letter, they asked the board to create a “fair and equitable process” to buy the holdings of minority shareholders.
After the board declined to do what Kellner and Brand asked, the two men assembled a group of Promega shareholders to try to purchase the company. The group secured the backing of Barclays, a U.K.-based bank, and Madison Dearborn Partners, a private equity firm based in Chicago. In July 2015, they wrote a letter to Promega’s board offering to buy the company’s outstanding stock for $625 a share in cash. That would have valued Promega at about $1.25 billion, according to a State Journal report.
Then, last September, five members of Promega’s seven-person board resigned, the lawsuit says. Plaintiffs claim in the suit that several of those who left say Linton prevented them from fulfilling their fiduciary obligations to the company’s shareholders. Linton then appointed four other Promega employees to the board, the lawsuit says, which rejected the $625 a share purchase offer in October.
Thomas Ragatz, whose family has owned stock in Promega since the 1980s, says that with no directors from outside the company, there’s little reason to believe Promega’s new “puppet board” can provide the oversight and scrutiny many other boards do. Ragatz is a retired attorney but is not closely involved with the group that filed suit.
It appears that Kellner, Brand, and other plaintiffs moved away from the idea of buying the company, and felt that a lawsuit was their only recourse.
In the lawsuit, the plaintiffs request a judicial order allowing them to sell their shares to Promega at what they call a “fair value.” They are also seeking compensatory damages, and “any other relief [the court] deems just and equitable under the circumstances.”
The plaintiffs and their legal teams may be in for a protracted and costly battle. The Swiss pharma giant Roche sued Promega in 1992, claiming the company had used Roche’s technology for copying genetic material without authorization. Thirteen years later, Roche settled for an undisclosed amount. Promega shelled out “tens of millions of dollars in legal fees,” Linton said in the Isthmus article from 2013, but he and others at the company got the outcome they wanted.
Asked if the Roche lawsuit saga suggests that Linton is someone who won’t back down without a fight, Ragatz, the attorney and shareholder, says “you can certainly read it that way.”
It will be up to Judge John Markson to determine whether the actions Linton and Promega have taken around the company’s ownership structure and board seats violate a Wisconsin statute that protects minority shareholders from “burdensome, harsh, and wrongful conduct” by directors and controlling shareholders, as plaintiffs aver in the lawsuit. Or the court could rule that the defendants did not act illegally, and that Linton’s moves to create the future he wants were merely those of a calculating businessman.
Lawsuit filed against Promega and Bill Linton
