How A Contract Case Led To A Securities Class Action

The Delaware Law Weekly has an article (via – free regist. required) on the D. of Del.’s recent grant of class certification in the Tyson Foods. Inc. case. The plaintiffs, a group of hedge funds who were seeking to arbitrage a merger between Tyson and IBP, Inc., allege that on March 29, 2001, Tyson falsely stated that it was backing out of the merger with IBP due to a government investigation into accounting discrepancies at one of IBP’s units. (The 10b-5 Daily has previously posted about the class certification decision.)

The article offers a thorough overview of the numerous cases that have been brought as a result of the IBP acquisition. Interestingly, the genesis of the securities class action appears to be some of the findings in the Delaware Chancery Court’s order directing Tyson to perform on its contract and complete the merger.

Quote of note: “The parties ultimately argued their cases before Vice Chancellor Leo E. Strine Jr., who, on June 15, 2001, ordered specific performance of the merger agreement. Strine determined that Tyson tried to back out of the merger due to buyer’s remorse and not the SEC’s inquiries into IBP’s subsidiary. In an opinion dated June 18, 2001, Strine said Tyson wished it had paid less for IBP, particularly in view of both companies’ poor performances in 2001. Strine also called into question Tyson’s claims that it had relied on misleading information about the SEC inquiries, and thereby was inappropriately induced into the merger. Less than 10 days after the Delaware Chancery Court ordered specific performance of the companies’ agreement, Robinson’s opinion states that the first of several class actions was filed in the matter in the Delaware District Court.”

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