Is $137.5M Shareholder Dividend New Model for Derivative Suits?

January 15, 2015

Christine S. Azar expands on the Freeport-McMoRan derivative suit settlement

Partner-in-charge of the Firm’s Delaware office Christine S. Azar explained that the Freeport suit wasn’t a typical M&A shareholder case. Freeport was the acquirer, not the target company. It’s much more common for shareholders of acquired companies to sue over claims that the sale price was too low. Those cases are usually brought as direct actions, not derivative suits, and a special dividend to the acquirer’s investors wouldn’t make sense. “This was an unusual factual situation for a merger suit,” she said. “I doubt this structure will become that commonplace.”

As she described it, the shareholder firms in this case began with the premise that Freeport had taken money from its shareholders by overpaying for the two companies it acquired in 2013. “The thought was, How do we really benefit shareholders?” Christine said.