Promega, CEO Linton Return Fire in Legal Battle with Shareholders

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year. The message was one of dozens made public last month when lawyers representing Promega filed the counterclaims; the release of these documents is part of the “discovery” phase of the lawsuit.

The recipient of Brand’s e-mail was Paul Shain, who served on Promega’s board of directors for eight years, until 2014. Shain also owns a small stake in Promega and served as the interim general manager of Promega’s North American operations from 2012 to 2014, according to court documents. (Promega says in one of the counterclaims that Shain, who currently serves as CEO of Madison-based Singlewire Software, was never a full-time employee at the company.)

Shain is mentioned in the lawsuit that Brand, Kellner, and other shareholders filed last year. They say he was one of two longtime directors who weren’t Promega employees that Linton decided not to nominate for reappointment in 2014. In the original lawsuit, plaintiffs say Shain opposed Linton’s “100-year plan,” a vision of Promega remaining private and independent until 2078 or later.

But according to the company’s counterclaims, Shain played a central role in a proposal Brand and some of his fellow shareholders put forth to buy Promega for $625 a share, or $1.25 billion. The proposal, which Promega would later reject, involved using $600 million worth of debt to help finance the transaction, firing Linton, installing Shain as CEO, and selling the company within five years, court records show.

Attorneys for Promega allege in one of the counterclaims that Brand and Kellner misled others who own shares in the company about having all the various pieces in place to move forward with the $1.25 billion acquisition. For example, Brand and Kellner apparently said in a July 2015 letter to shareholders that they had received “strong support for the debt component of the transaction” from Barclays, an international financial services company. However, when Brand and Kellner contacted Promega’s board of directors in July 2015 saying they planned to buy the company in a “hostile takeover,” the letter from Barclays they shared with board members allegedly did not mention any firm commitment to help finance the deal, lawyers for Promega say. (The Barclays letter was not one of the documents made public along with the e-mails and notes from Brand, Kellner, Shain, and others.)

Some shareholders responded to the July 2015 letter from Brand and Kellner, asking about details of the proposed acquisition, according to attorneys for Promega. The group led by Brand and Kellner allegedly told these shareholders that “we expect Promega to grow, prosper, and remain headquartered in Wisconsin,” according to one of the counterclaims. In reality, lawyers for Promega say, Brand and Kellner’s group put together a document that mentioned the “sale of the business at the end of five years,” post-acquisition. Further, Brand, Kellner, and Shain allegedly acted duplicitously by leading fellow shareholders to believe that the goal of the proposed acquisition was to allow all shareholders to be able to get a fair return on their investment, when in fact the transaction was structured to deliver disproportionate financial benefits to the three men, attorneys for Promega say.

While the so-called hostile takeover attempt led by Brand and Kellner would ultimately founder, the two were “ultimately successful in sowing fear and dissension” among members of Promega’s board of directors, lawyers for the company say. As a result, they say, five of the board’s seven members resigned in September 2015. Linton then appointed four other Promega employees to the board.

One of the board members who stepped down that month was Antonio Mello, a professor at the University of Wisconsin-Madison, attorneys for Promega say. Several months prior, in May … Next Page »

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