Shareholder Sues Carter Hawley on Restructuring Plan
A Carter Hawley Hale Stores stockholder has filed suit against the company, charging that its recently announced restructuring plan, which thwarted a takeover effort, will keep shareholders from realizing potential profits.
The suit, filed Friday in Los Angeles Superior Court, alleges that Carter Hawley executives rebuffed a suitor called Retail Partners in order to “secure their lucrative positions.”
The suit, which seeks an unspecified amount in punitive and compensatory damages, also names Carter Hawley’s largest shareholder, General Cinema, and the retailer’s financial advisers, Morgan Stanley and Dillon, Read & Co. A spokesman for Carter Hawley refused to comment on the suit, while the others named could not be reached.
According to the suit, plaintiff Richard A. Ash, a Pennsylvania resident, owned 500 shares of Carter Hawley stock when the company on Dec. 8 announced a planned restructuring. That action prompted Retail Partners to withdraw its $60-a-share bid for the chain.
By announcing a restructuring, Carter Hawley made it “extremely difficult for any outside party to successfully acquire Carter Hawley, even at cash prices well in excess of Carter Hawley stock’s historical price range,” according to the suit.
Ash alleges that Carter Hawley executives and board members planned a “series of complex financial transactions having no beneficial business purpose . . . (other than) . . . preventing themselves from being ousted from their position at Carter Hawley.”
Separately, General Cinema disclosed that stock purchases made this week increased its holdings in Carter Hawley to 49.1%. According to documents filed with the Securities and Exchange Commission, the Dec. 9 purchases of nearly 3.6 million shares, disclosed earlier, were at a per-share price of $50, or about $177.9 million in total.
As a result, General Cinema’s stake in the new specialty- store company will probably exceed 60% of the firm’s equity, the company said. That is an increase from 52% projected in an earlier filing by Carter Hawley. However, General Cinema’s voting stake will be limited at 44%, as earlier reported.
After the restructuring, General Cinema is expected to have a stake in Carter Hawley’s department store division of about 15% but will have no board representation, Carter Hawley spokesman Bill Dombrowski said Friday. It will be a “passive investment” that under a standstill agreement cannot be increased for 10 years.
