DFG Patches Up with Shareholders - Analyst Blog

Delphi Financial Group Inc. (DFG) has agreed to settle a shareholder suit filed against the company concerning its buyout by Tokio Marine Holdings Inc. (TKOMY).

Delphi will be paying its class A shareholders and option holders their share of pro rata payment equal to $49 million, less plaintiffs’ counsel fees and expenses.

The deal was announced in December 2011 when Tokio Marine expressed its intention to expand its presence in the U.S life insurance market. Per the agreement, Class A stockholders were to receive $43.875 per share in cash while the holders of Class B shares were to receive a higher compensation of $52.875 per share. Apart from the cash payment, the shareholders were also entitled to receive a one-time special dividend of $1 per share.

The agreement faced opposition from Delphi shareholders as they claimed that the deal was structured in such a way that Class B shares, held by Delphi’s CEO Robert Rosenkranz, would fetch a higher payout in comparison to Class A shares. In January, the agreement was tagged as unfair and consequently the shareholders sued the company in Delaware Chancery Court in Wilmington to lock the sale, on account of the provisions regarding “disparate consideration.”

The judge ruled that the plaintiffs may continue with their litigation. However, they could vote since they were already receiving a premium for their share. The judge also said that discontented shareholders have the right to receive monetary compensation for Rosenkranz’s actions. 

Consequently, at a special meeting held last month, Delphi received approval from its shareholders with a total of 86.1% of them voting in favor of the sale.

A major hurdle before the deal has been overcome and the sale is expected to be completed by the second quarter of 2012, subject to U.S and Japanese regulatory compliance and the fulfillment of other customary conditions.

DELPHI FINL GRP (DFG): Free Stock Analysis Report

TOKIO MARINE HL (TKOMY): Free Stock Analysis Report

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