Investment fund Newcastle Partners LP has filed a lawsuit against Whitehall Jewellers Inc., claiming the jewelry chain is trying to stymie Newcastle's takeover efforts.
In a lawsuit filed January 4, in the Southern District of New York, the Newcastle said Whitehall's directors and Prentice Capital Management LP have conspired to rig a proxy fight over a proposed change in the company's charter that would allow the board to issue more shares and transfer control of the company to Prentice.
In October, Whitehall announced it had reached an agreement with Prentice to restructure its debt and improve its financial condition. Under the agreement, it would receive a $30 million bridge loan and issue $50 million in secured convertible notes in exchange for giving Prentice control of 87 percent of its common stock.
Shareholders are set to vote on the changes in Whitehall's corporate charter on Jan. 19.
Newcastle, which said it's the second largest independent shareholder of Whitehall, has made several tender offers for the company since the financing package was announced. Its latest offer was $1.50 a share.
A Whitehall spokesman wasn't immediately available to comment late Thursday. Whitehall shares rose 1 cent, at $1.24 in morning trading Friday on the OTC Bulletin Board.
In its complaint, Newcastle alleges that Whitehall's directors would remain in place under Prentice's proposal and that they have implemented a variety of measures intended to stack the deck in favor of Prentice, including waiving "poison pill" protections for Prentice, but not Newcastle.
The lawsuit also claims that Prentice has contacted selected shareholders who own significant blocks of the company's stock and offered to purchase their shares at a substantial premium to the market price on the condition they cast their proxy vote in favor of Whitehall's management.
Earlier Thursday, Whitehall asked its shareholders to take no action on the Newcastle proposal. The company said the board would disclose its position on the revised offer at a later time after reviewing the offer's terms.
The company said that its board has previously determined that it cannot consider any proposal without a firm commitment for refinancing the company's outstanding debt and meeting its future financial needs. Newcastle has failed to demonstrate its ability to do so, the company said.
Posted by Barry Gutwein on January 8, 2006 9:47 AM in Jewelry Stores Comments (0)
In a lawsuit filed January 4, in the Southern District of New York, the Newcastle said Whitehall's directors and Prentice Capital Management LP have conspired to rig a proxy fight over a proposed change in the company's charter that would allow the board to issue more shares and transfer control of the company to Prentice.
In October, Whitehall announced it had reached an agreement with Prentice to restructure its debt and improve its financial condition. Under the agreement, it would receive a $30 million bridge loan and issue $50 million in secured convertible notes in exchange for giving Prentice control of 87 percent of its common stock.
Shareholders are set to vote on the changes in Whitehall's corporate charter on Jan. 19.
Newcastle, which said it's the second largest independent shareholder of Whitehall, has made several tender offers for the company since the financing package was announced. Its latest offer was $1.50 a share.
A Whitehall spokesman wasn't immediately available to comment late Thursday. Whitehall shares rose 1 cent, at $1.24 in morning trading Friday on the OTC Bulletin Board.
In its complaint, Newcastle alleges that Whitehall's directors would remain in place under Prentice's proposal and that they have implemented a variety of measures intended to stack the deck in favor of Prentice, including waiving "poison pill" protections for Prentice, but not Newcastle.
The lawsuit also claims that Prentice has contacted selected shareholders who own significant blocks of the company's stock and offered to purchase their shares at a substantial premium to the market price on the condition they cast their proxy vote in favor of Whitehall's management.
Earlier Thursday, Whitehall asked its shareholders to take no action on the Newcastle proposal. The company said the board would disclose its position on the revised offer at a later time after reviewing the offer's terms.
The company said that its board has previously determined that it cannot consider any proposal without a firm commitment for refinancing the company's outstanding debt and meeting its future financial needs. Newcastle has failed to demonstrate its ability to do so, the company said.
Posted by Barry Gutwein on January 8, 2006 9:47 AM in Jewelry Stores Comments (0)
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