BR&B Files Class Action Lawsuit Challenging Merger of Schawk Inc. and Matthews International Corp.

4/4/2014 - Barrack, Rodos & Bacine announces that it has filed a class action lawsuit in the Court of Chancery of the State of Delaware on behalf of the public stockholders of Schawk, Inc. against the company’s board of directors and controlling shareholders for breaches of fiduciary duties arising out of the sale of Schawk to Matthews International Corp.

The complaint alleges that under the merger agreement, the Schawk board agreed to onerous procedures designed to make the proposed merger a fait accompli and to ensure that no competing offers emerge for Schawk.  For example, the merger agreement does not require that a majority of the unaffiliated shares vote in favor for the merger for it to be completed.  Because there is no provision requiring a majority of unaffiliated votes for the merger, the outcome of the shareholder vote will be meaningless since the controlling shareholders, who together own 62% of Schawk, have already agreed to vote in favor of the deal.  In addition, the merger agreement includes a strict “no shop” provision. 

The complaint further alleges that, instead of protecting the interests of shareholders, defendants advanced their own interests first, negotiating significant special benefits that they will receive from the proposed merger.  Those benefits include a senior management position for David Schawk at the combined company, seats on the board of the combined company, and the immediate vesting and cash payment for options and restricted stock held by the defendants.  The complaint also alleges that the consideration offered to Schawk shareholders in connection with the proposed merger significantly undervalues Schawk in light of the company’s recent results and expected growth and in comparison to its competitors.

A copy of the complaint is available by clicking here.  For additional information about this class action, please contact Barrack Rodos & Bacine at (215) 963-0600, or via e-mail to Lisa M. Lamb at llamb@barrack.com or Julie B. Palley at jpalley@barrack.com