In Battle Between Promega and Shareholders, Linton Heads to Court

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toolkit which he says researchers can use for tasks like measuring enzyme concentrations. At the time, he says, luciferase was one of Promega’s two biggest product lines, along with ribonuclease inhibitors.

Cuellar’s stake in Promega is small, at least compared to the holdings of some of the plaintiffs in the lawsuit. Still, he says he’s getting close to retirement and “would like to get some cash,” preferably in the next couple years. He says he was excited to hear about the offer the group led by Kellner and Brand made last year to acquire Promega, as the windfall would have given Cuellar an opportunity to invest his money elsewhere.

Cuellar questions some of Promega’s expenditures, such as the Feynman Center, a 260,000-square-foot facility built to allow manufacturing of materials in a way that meets standard FDA specifications.

Linton “built that new pharmaceutical production [good manufacturing practice] laboratory there, but he hasn’t really used it,” Cuellar says. “Theoretically, that was going to be a big production operation when Promega started developing drugs, or something like that. But as far as I can tell, he’s not doing that yet.”

Cuellar adds that the Feynman Center is in accordance with Linton’s affinity for showy spaces. “Bill often spends more than he has to for the bells and whistles on buildings,” he says.

Asked whether he believes this or any of Linton’s other actions violated his fiduciary duty to shareholders, Cuellar points to the fact that Promega is still growing. “The company has always made a lot of money,” he says. “I really can’t complain about the way [Linton] has grown the company.”

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During Promega’s first 25 years in business, shareholders seemed to have an overall positive view of Linton’s leadership, plaintiffs say in the lawsuit.

The plaintiffs, whose investments in Promega date as far back as 1988, provide several examples to bolster their argument that Linton for years acknowledged his company’s obligation to get shareholders a “fair return” on their investment.

“When [the] Plaintiffs invested in Promega, all signs pointed to Promega being on a path to an IPO, sale, or merger,” the lawsuit says, and that the plaintiffs had an “expectation that Promega would offer shareholders an opportunity to exit at a fair value.”

There is evidence in the lawsuit to support these claims: Boehringer Ingelheim, a German pharmaceutical company, acquired 20 percent of Promega’s capital stock in 1990; multiple internal discussions about selling the company or taking it public took place between 1989 and 2003; and venture capital funds, such as Greylock Partners (now based in Silicon Valley), invested in Promega.

In 2000, Promega got as far as identifying underwriters and engaging Robert W. Baird & Co., a Milwaukee-based financial services firm, to assist with a public offering. But according to the lawsuit, Linton cancelled the planned IPO later that year, citing poor market conditions.

There are few details in the lawsuit indicating whether, between 2003 and 2013, there was … Next Page »

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