Seems like a deal isn’t a deal these days without an unhappy stockholder and a contentious lawsuit.
Micro Therapeutics Inc. is being sued over its pending sale to Minnesota’s ev3 Inc., which already owns 70% of the Irvine medical device maker.
Lascala Partners LLC, a low-profile Micro Therapeutics investor, is suing the company and several of its officers and directors, as well as ev3.
Earlier this month, ev3 offered to buy the rest of Micro Therapeutics for $110 million. As of last week, Micro Therapeutics had a market value of $320 million.
Lascala’s main gripe is that it believes the offer undervalues Micro Therapeutics. The offer “is an attempt by ev3 to aggrandize itself at the expense of the company’s public stockholders,” Lascala said in the suit.
Little is known about Lascala, which filed its suit in Delaware’s Chancery Court. The firm describes itself as a “beneficial owner” of Micro Therapeutics’ stock but doesn’t specify how much it owns.
Lascala doesn’t show up as an owner on Micro Therapeutics’ filings with the Securities and Exchange Commission because it doesn’t own more than 5%.
In 2004, Lascala was a plaintiff in a class-action shareholder suit against Wet Seal Inc., the Foothill Ranch-based women’s clothing retailer. Milberg, Weiss, Bershad & Schulman LLP, William Lerach’s former firm, represented Lascala in that suit.
Ev3’s bid for Micro Therapeutics isn’t surprising. The company acquired a stake in Micro Therapeutics back in 2001 and owned 70% by 2003. Orange County resident James Corbett doubles as Micro’s chairman and ev3’s chief executive.
The likely clincher for a buy was July’s Food and Drug Administration approval of Micro’s lead product, Onyx, which is used to treat diseased blood vessels in the brain.
Corbett and others from Micro declined to comment on Lascala’s suit. In an SEC filing, ev3 said “It believes this lawsuit is without merit and plans to defend it vigorously.”
On Oct. 7, a letter signed by Corbett was sent to Micro’s directors outlining the buyout proposal, according to Lascala’s suit.
Ev3 offered $6.91 a share for Micro, payable in ev3 shares. The price was 16% higher than where Micro’s shares closed a day before the offer.
Shortly after the offer, ev3 and Micro Therapeutics said that a special committee of Micro directors not affiliated with ev3 was prepared to recommend the buyout. The committee was made up of Richard Randall and George Wallace, who are named in Lascala’s suit.
Lascala alleges that the consideration per share for Micro “is unfair and inadequate” because, among several things, “the intrinsic value of the company’s stock is materially in excess of the exchange ratio per share that ev3 has proposed.”
The suit also alleges the price “is not the result of arm’s length negotiations but was fixed arbitrarily by ev3 to ‘cap’ the market price of the company and obtain its assets and businesses at the lowest possible price.”
Lascala contends that Micro issued a press release about the buyout “two days after it received ev3’s proposal, and without ascertaining whether another entity was interested in acquiring (Micro) at a greater price.”
The buyout letter came two days after Micro released initial third-quarter results showing sales shot up 72% to $14.1 million from a year earlier, according to the suit.
Micro released full quarterly results last week, reporting a narrower loss of $1.7 million, down from $15.5 million a year ago.
“Recognizing the company’s strong performance and potential for even greater growth, the company’s majority shareholder has determined to deny (its) public shareholders the opportunity to obtain fair value for their equity interest by proposing a transaction at an inadequate premium,” Lascala said in its suit.
Lascala also takes aim at the makeup of Micro’s seven-member board. Micro and ev3 have four common directors,Corbett, Richard Emmitt, Dale Spencer and Elizabeth Weatherman.
Randall and Wallace,who served as Micro’s chief executive from its start in 1993 to 2000,and current Chief Executive Thomas Wilder make up the remainder of the board.
“Given ev3’s stock ownership of the company and its representation on the board of directors, it is able to dominate and control the other directors,” Lascala charged in its lawsuit.
Lascala is seeking, among other things, certification of the lawsuit as a class-action complaint, a permanent injunction against the proposed deal and compensation “for all damages they sustain as a result of defendants’ unlawful contact.”
