Suit challenges acquisition of Revett
Two separate lawsuits have been filed challenging the proposed sale of Revett Mining Inc. to Hecla Mining and its subsidiary, RHL Holdings Inc., alleging a breach of fiduciary duties by Revett’s board of directors arising from the merger agreement negotiated between the two companies.
The Seattle firm of Breskin, Johnson & Townsend PLLC is acting as local counsel for the New York City-based firm of Levi & Korskinsky LLP, and filed the suits on behalf of Revett shareholders Chad Okerberg and Todd Lokash. The suits both seek class-action status on behalf of all Revett shareholders and the Lokash suit seeks a judicial injunction to prevent any further action from being taken on the proposed merger.
The suits, while technically separate, are based in the same allegations.
First, both plaintiffs allege the price negotiated between the parties was not fair and was not in the best interest of Revett shareholders. Under the terms of the deal, Revett common stock would be converted into Hecla common stock at a ratio of .1622 shares of Hecla stock per share of Revett.
Based upon yesterday’s stock prices, shareholders of Revett would gain some value in the transaction. Hecla stock, as of 4 p.m. Eastern was trading at $3.09 per share and Revett at $.50. A person holding 100 shares of Revett stock would have stock valued at $50. Translated into 16.22 shares of Hecla, the value is $50.05. With 39 million shares of common stock outstanding, the total value of Revett stock is $19 million. Translated into Hecla stock at the .1622 ratio, the value is $19,546,722.
The suits allege the gain is not enough, based upon the future earnings potential of the Rock Creek Mine. The project, while not yet approved and permitted by the United States Forest Service, is expected to provide solid income from silver and copper mining for several decades.
The suits also claim Revett and Hecla have acted improperly in how the deal was structured, effectively cutting out any other potential buyers.
The deal includes an “anti-waiver provision,” which prohibits Revett from amending or granting any waiver or release under any agreement with respect to any class of equity securities or stock in the company. The Okerberg suit alleges the companies most likely to offer competing bids are those who would be impacted by such an agreement.
Should a bidder not be obligated to such an agreement and come forward with a higher bid, the agreement also allows the Revett board to lock that bid down with a confidentiality and standstill agreement before providing any due diligence information on the company.
The agreement also includes a termination fee of $825,000, plus any “actual and reasonable costs” incurred by Hecla in the pursuit of the merger, should Revett decide to terminate the agreement prior to obtaining shareholder approval for the merger. The fee, the suit alleges, makes it impossible for another bidder to offer a viable competitive option.
A shareholders’ meeting will be held in May or June to allow shareholders the opportunity to approve or reject the proposed merger.
Revett chief executive officer John Shanahan said he was unable to comment on pending litigation. A message left for the plaintiffs’ attorney, Julia Sun, went unreturned as of press time.