An $86.5 million settlement has received approval in Delaware state court, resolving the class litigation pending between shareholders of medical examination provider ExamWorks Group Inc. and the company’s officers, directors, financial advisors and legal counsel over its $2.2 billion acquisition by private equity firm Leonard Green & Partners. During a hearing in Wilmington, Delaware, class attorney Michael Hanrahan of Prickett Jones & Elliott PA told the court that the settlement was achieved after mediation with a retired federal judge just before the case was set to go to trial in Delaware’s Chancery Court.
The settlement is actually comprised of two separate agreements, with Defendants tied to ExamWorks, purchaser Leonard Green & Partners and financial advisers Goldman Sachs & Co. and Evercore Groups LLC contributing $40 million in exchange for a release of claims by the class. ExamWorks’ legal advisers, law firm Paul Hastings LLP, will provide $46.5 million.
Stockholder City of Daytona Beach Police and Fire Pension Fund filed a lawsuit in June 2016 alleging the acquisition was “irreparably tainted” by what it says was ExamWorks executive chairman Richard E. Perlman’s control of the process. A class of shareholders of the company who held ExamWorks stock between April and July 2016 was certified by the court in February.
Vice Chancellor J. Travis Laster approved the settlement fund, saying it fell within an acceptable range of reasonableness considering the work put in by counsel to litigate to the pretrial stage and the merits of their claims. Vice Chancellor Laster said:
That’s real cash and a meaningful improvement over what the deal price was. It’s significantly higher than what the special committee was able to negotiate.
The settlement represented a $2.17 per share recovery for shareholders on the original $35.05 deal price. The court also approved the $575,479.21 in expenses requested by counsel as well as a 25 percent share of the settlement fund, amounting to $21,481,130, which Vice Chancellor Laster said was right in line with what the court is usually comfortable with awarding in cases litigated to the point of trial.
The merger was a take-private deal that was allegedly led by ExamWorks management and resulted in the company becoming a wholly owned subsidiary of a Leonard Green & Partners unit. The suing shareholders claimed the company’s board didn’t appoint a special committee to vet the deal until its consummation was a foregone conclusion, resulting in a lower-than-fair deal price for investors.
The City of Daytona Beach Police and Fire Pension Fund is represented by Michael Hanrahan, Bruce E. Jameson, Paul A. Fioravanti Jr. and Samuel L. Closic of Prickett Jones & Elliott PA, and Lee D. Rudy, Michael C. Wagner, J. Daniel Albert and Stacey A. Greenspan of Kessler Topaz Meltzer & Check LLP.
The case is The City of Daytona Beach Police and Fire Pension Fund v. ExamWorks Inc., et al., (case number 12481) in the Delaware Court of Chancery.