Maybe M-Flex should have filed in family court this time.
Anaheim-based Multi-Fineline Electronix Inc., known as M-Flex, is suing its Singapore parent company so it doesn’t have to acquire a sister company.
M-Flex said Tuesday it has gone to the Delaware Chancery Court to force WBL Corp.,which owns a majority of M-Flex,to vote against a combination with Singapore’s MFS Technology Inc., which also counts WBL as its parent company.
M-Flex, which makes flexible circuit boards, said in March it planned to buy its sister company in a $500 million deal.
But MFS then posted soft sales in the spring, leading M-Flex to try and get out of the acquisition.
In M-Flex’s lawsuit, the company said if WBL voted in favor of the acquisition, the parent would “be breaching its fiduciary duties and obligations to M-Flex’s minority stockholders.”
Some minority shareholders back the deal.
On Oct. 11, M-Flex sued hedge fund managers Michael Roth and Brian Stark and several of their funds after they took large positions in M-Flex.
M-Flex contends that Stark hedge funds have failed to disclose ownership of 32 million MFS shares. The funds also own 18% of M-Flex.
The funds plan to use their stakes to vote for the acquisition of MFS, according to M-Flex.
“M-Flex must rely on WBL to vote against the offer in order to prevent substantial harm to the company,” M-Flex said. “Unfortunately, WBL has notified M-Flex that despite M-Flex’s offer to release WBL from its obligations …WBL believes it is required to abide by the agreement and vote in favor of the offer.”
The company went on to say that “the lawsuit, while unpleasant” is necessary.
M-Flex wants the court to declare that if WBL complies with the agreement, WBL would be violating its duties to M-Flex’s unaffiliated stockholders.
