CASES
Fushi Copperweld Inc. (Nevada District Court)
Summary of Case:
A securities class action has been filed against Fushi Copperweld Inc. (Nevada District Court) (FSIN) ("Fushi" or the "Company") on behalf of the holders of the common stock of Fushi. The case has been filed in the Nevada District Court, Clark County.
The allegations arise from the Company and its board of directors' ("Board") breaches of fiduciary duty and/or aiding and abetting such breaches of fiduciary duty in connection with a proposed "going private" transaction for grossly inadequate consideration (the "Proposed Transaction").
The Proposed Transaction was detailed in a letter (the "Proposal Letter") sent from the Company Chairman and CEO, Mr. Li Fu ("Mr. Fu"), along with the investment fund Abax Global Capital Limited ("Abax Fund"), to Fushi's Board and announced in a press release on November 3, 2010. Pursuant to the proposed Letter, Mr. Fu and Abax Fund seek to acquire all of the outstanding shares of common stock of Fushi not currently owned by Mr. Fu and his affiliates for $11.50 per share in cash, which values the Company at $434.5 million. Mr. Fu and his affiliates currently own approximately 29.2% of Fushi's common stock.
According to the Proposal letter, Mr. Fu and Abax Fund will form an acquisition vehicle for the purpose of completing the acquisition and plan to finance the acquisition with a combination of debt and equity capital. The Proposal Letter states that the equity portion of the financing would be provided by Mr. Fu, Abax Fund and related sources. The Proposal Letter also states that Mr. Fu and Abax Fund are currently in discussion to engage a financial advisor to the acquisition vehicle to be formed by Mr. Fu and Abax Fund.
The complaint alleges that not only is the consideration offered to Fushi shareholders grossly inadequate, but the negotiation and structure of the Proposes Transaction are the result of an unfair process. The complaint alleges that in pursuing their unlawful objective to squeeze out Fushi's public shareholders, Fushi's Board has breached its fiduciary duties of loyalty, due care, independence, candor, good faith and fair dealing, and has also aided and abetted such breaches by other Fushi officers and directors. Although a Special Committee was formed by the Company to evaluate the Proposed Transaction, this committee is beholden to Mr. Fu and, thus, is not capable of a fair evaluation of the Proposed Transaction.
The complaint alleges that the Proposed Transaction will deprive Fushi shareholders of adequate consideration in the light of the Company's growth, anticipated operating results, net asset value, and future profitability. Under these facts and circumstances, the decision of Fushi's Board to consider the Proposed Transaction constitutes nothing more than a sham and breach of their fiduciary duties.
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