Several shareholder rights law firms have opened investigations into whether the board of The Baldwin Group breached its fiduciary duties in agreeing to the company’s sale to a consortium backed by Michael Dell’s family office.
Los Angeles-based Schall, Brown & Schwartz is the latest to announce a probe. It said it is examining whether Baldwin’s directors and management breached their fiduciary duties to shareholders. Kaskela Law and Bronstein, Gewirtz & Grossman have announced similar investigations. Both have focused on whether the $32.50-a-share price gives investors fair value.
On September 14, Baldwin agreed to be taken private by an entity formed by Sequence Holdings and DFO Management, the Dell family’s investment office, in an all-cash deal valued at about $7.7 billion. Shareholders will receive $32.50 per share. Baldwin says that is a premium of about 88% to its unaffected closing price on June 17, the day before reports emerged that the company was considering a take-private transaction.
Eligible Baldwin employees who hold equity can roll part of their holdings into the private company, keeping a significant minority stake alongside the buyers. Reports at the time said the Dell-led group beat several large private equity firms to win the deal.
The law firms’ case on value rests on analyst forecasts. Two of the firms said that while the deal was being negotiated, numerous analysts had price targets on Baldwin’s shares at or above $36.
No lawsuit has been filed against Baldwin’s board as part of these investigations, and none of the firms has made specific allegations of wrongdoing.
Shareholder investigations like these are common after public company takeovers, and few stop a deal from closing. Often they lead to additional disclosures in the proxy materials sent to shareholders before they vote. Even so, the scrutiny comes as Baldwin moves toward a shareholder vote on one of the largest brokerage take-privates of the year.
For brokers and carriers who work with Baldwin, the business impact is limited for now. Baldwin continues to operate as normal while the deal goes through regulatory and shareholder approvals.
The bigger question for the market is what private ownership by a technology-focused buyer, rather than a traditional private equity sponsor, will mean for Baldwin’s strategy once the deal closes.
