In Battle Between Promega and Shareholders, Linton Heads to Court

Xconomy Wisconsin — 

To say that Bill Linton has a long-term vision for Promega, the Fitchburg, WI-based biotech business he founded in 1978 and continues to lead as chairman and CEO, would qualify as an understatement. In 2013, he told the Isthmus newspaper that he was working to arrange a corporate structure that would allow Promega “to celebrate its 100-year anniversary as a private company, as an independent company.”

Linton’s commitment to organic growth—and avoidance of a merger or acquisition that could force the company to relocate—has been a boon to the state’s life sciences sector, and to the business community in general. A majority of the company’s 1,400 employees are based in Wisconsin, and over the years a number of Promega spinoffs have been launched, including Epicentre, Lucigen, and PanVera.

Promega, a manufacturer of reagents and other life sciences research tools, has not relied solely on revenues and retained earnings to create those jobs and scale up its operations. Like many other firms, it has allowed investors to put money into the company in exchange for shares of stock.

Until recently, these shareholders had mostly remained patient. Because Promega was profitable and growing, their thinking went, plowing proceeds back into the company would further increase the value of their shares. The ultimate result would be a larger return when the company had its eventual exit, these investors believed.

But when Linton spoke of his 100-year plan, some shareholders began wondering when, if ever, they’d see a return, and whether Linton was still acting with their best interests in mind.

What followed has been a bitter standoff between Linton and some of the shareholders to whom he and his company have a fiduciary duty. The clash reached new heights last Wednesday when a group of plaintiffs led by Ted Kellner, a Milwaukee-based investor, and Nathan Brand, a Miami-based real estate developer, filed suit against Linton and Promega in Dane County Circuit Court. The lawsuit, which details the shareholders’ motivations and requests, was first reported by the Wisconsin State Journal. (You can read the full text of the lawsuit at the end of this article or by clicking here.)

Dan Ghoca, general counsel at Promega, provided a statement about the lawsuit to Xconomy, via an e-mail message.

“On Wednesday, a few shareholders of Promega filed a lawsuit, on their own behalf, seeking to force the company to purchase their shares,” Ghoca wrote. “We believe the allegations lack merit and we will take all appropriate steps to defend the interests of the company and all of its constituents and, most importantly, to continue the outstanding performance of the business.”

Following a review of the lawsuit and conversations with several Promega shareholders, what emerges is a perception of two Bill Lintons: the visionary who started a business and oversaw its transformation into an industry leader, and the Linton of the past few years, who plaintiffs say “bullied, lied, threatened, and manipulated his way” to a controlling interest in the company, according to court documents.

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Richard Cuellar, a Promega shareholder and former employee who is not one of the plaintiffs named in the lawsuit, joined the company in 1997 to work in its licensing department. By the time he left, in 2004, he had been named director of corporate development. Two years after Cuellar’s departure, which he says was amicable, he moved to Canada. Today he is based in the Ottawa, Ontario area.

During his stint at Promega, Cuellar worked on the company’s luciferase assay system, a … Next Page »

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