Attorneys for Delhaize Group and the people who earlier challenged Delhaize’s complete acquisition of Delhaize America will ask a judge to end the dispute Wednesday.
And attorneys who challenged Delhaize Group’s offer say they’re due $975,000 in fees and expenses for their efforts.
In documents filed with the N.C. Business Court, the lawyers say that Delhaize Group “will not oppose” that payment.
If Judge Ben F. Tennille agrees with that figure, Delhaize America, parent company of Salisbury-based Food Lion, will pay the lawyers for the other side.
The lawyers who challenged Delhaize Group’s offer say they’ve earned the money because they helped convince the Belgian company to increase its offer for all outstanding Delhaize America stock.
They say their efforts helped increase the value of the offer to Delhaize America stockholders more than $225 million.
They base their argument on Delhaize Group’s decision to increase its offer from .35 to .4 shares of Group stock for each outstanding share of Delhaize America stock.
They also base their analysis on the price of Delhaize Group stock on Sept. 6, when the company first made the offer.
But critics, such as Food Lion co-founder Ralph Ketner, have pointed out that even with the higher stock offer, Delhaize America stockholders were actually getting less money. By the time the company increased its offer, the price of Delhaize Group’s stock had dropped.
Ketner disputes the idea that the people challenging the acquisition proposal helped improve Delhaize Group’s offer.
“That’s for the birds,” he said Friday morning.
Ketner said Delhaize Group was forced to “up the ante” because the value of its stock — and thus its buyout offer — had dropped so much.
At the time of the original offer, the value to minority stockholders was $20.18 a share.
In November 2000, when Delhaize Group increased the offer to .4 of its share, the value to those stockholders had dropped to $18.61.
The value to minority stockholders has since increased to $22.32 a share, but Ketner says that attorneys challenging the acquisition didn’t know that and don’t deserve credit.
To make the minority stockholders at least even, Delhaize Group should have raised its exchange offer to at least .43 or .44 of Group stock in November.
Lawyers on both sides of the case have “dressed up” the settlement offer because “they didn’t want it to look as bad as it really is,” Ketner said.
Pat Weiser, a lead attorney for the people who challenged the acquisition, did not return phone calls from a Post reporter.
Linn Evans, assistant general counsel for Delhaize America, said this week that the settlement already has benefited all the minority stockholders.
“We were very pleased to reach a settlement with the plaintiffs back in November,” he said.
Ruth Kinzey, Food Lion’s director of corporate communications, said, “We are pleased that this is moving along smoothly, and we are looking forward to having closure on this other aspect and moving along with our business.”
Charges of self-dealing
The legal challenges began immediately after Delhaize Group’s offer to buy all Delhaize America stock that it didn’t already own. At the time, Delhaize Group owned 45 percent of all Delhaize America stock.
Lawyers for eight individuals or businesses challenged the offer, saying it was unfair to minority stockholders. One suit, for example, accused Delhaize Group, “with the acquiescence of the board of director of Delhaize America,” of “self-dealing and not acting in good faith toward” minority shareholders.
Seven of the lawsuits were consolidated and assigned to the Business Court in Greensboro, a special court that handles complex business litigation.
In court documents, Jonathan M. Plasse, one of the attorneys challenging the acquisition offer, said that challengers hired a financial expert in Texas to analyze the Delhaize Group’s offer.
The challengers’ lawyers say “had a series of communication and negotiations with both representatives” Delhaize Group and a special committee of the Delhaize America board. The committee of board members not associated directly with Delhaize Group hired its own consultants and lawyers to analyze the offer.
“In addition, during the first half of November 2000, we had discussions with representatives of the Delhaize Group to improve the proposal,” Plasse wrote.
“During these discussions, and based up our prior discussions with our financial consultant, we advised counsel for the Delhaize Group that we believe the proposal was inadequate based upon, among other things, (the) trading price of Delhaize American shares and valuations based upon comparable companies and comparable transactions analyzes.
“... We advised counsel for the Delhaize Group that the exchange ratio in the proposal should be increased to a ratio in excess of 0.40 ...”
Plasse said Delhaize Group attorneys said they “would not increase the exchange ratio to the amount we had requested but was willing, in the context of a settlement of the (lawsuits), to increase it from 0.35 to 0.40 shares of Delhaize Group for each share of Delhaize America Class A or B stock.”
About the same time, attorneys for the people challenging the offer say they learned that the special committee of the Delhaize America board had decided to accept the .4 offer.
Delhaize Group says it agreed to increase its offer around Nov. 10, and attorneys for the challengers agreed to settle their lawsuits against Delhaize Group on Nov. 15.
In a Memorandum of Understanding that is part of the settlement, Delhaize Group officials acknowledged that the challengers’ lawsuits and the work of their attorneys “were a material factor that lead to the increase” in the Delhaize Group offer.
“There are really no outstanding issues that we are aware of at this time,” Linn Evans, the Delhaize America assistant general counsel, said this week.
The purpose of Wednesday’s hearing in Greensboro is “in large part to document and finalize the settlement,” he said.
Evans said that one law suit filed in Maryland did not join the suits in North Carolina challenging Delhaize Group’s acquisition offer.
Evans said a judge in Maryland recently granted Delhaize Group’s request to dismiss the suit. Evans said the company argued, in part, that “all the shareholders have already received the benefit of the settlement” in the North Carolina cases.
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