Class Seeks to Halt Merger Between Utz and Inventure

(CN) – Shareholders claim in a class action that Utz Quality Foods’ pending acquisition of snack food maker Inventure undervalues the company and should be halted due to a deficient solicitation statement.

The lawsuit in Arizona federal court claims the $4-a-share buyout price is too low given the company’s revenue growth in the first two quarters of 2017.

The class claims the roughly $165 million acquisition should be halted over allegedly withheld material information related to the merger.

Among other demands, lead plaintiff Susan Vana wants more information on the “timing and nature” of communications between Inventure and Utz regarding post-merger employment for Inventure managers, including its chief financial officer Steve Weinberger, who is slated to be retained as a consultant following the merger’s closing, the complaint says.

Vana further claims the solicitation statement omits key performance projections for Inventure, estimates for liquidation value of the company’s assets, costs associated with the merger, and the assumptions underlying Inventure advisors’ discounted cash flow analysis.

Vana is represented by Gerald Barrett of Ward, Keenan & Barrett in Phoenix, along with Brian Long and Gina Serra of Rigrodsky & Long in Wilmington, Delaware.

In a public statement announcing the merger, Inventure CEO Terry McDaniel touted the deal as a smart move for shareholders.

“This transaction is the result of diligent analysis and thoughtful strategic deliberations by our Board of Directors and the result of the strategic and financial review we initiated in July 2016,” McDaniel said.  “Our Board, with the advice of independent advisors, determined that this transaction will deliver immediate and certain cash value to our stockholders and new opportunities for our snack brands.”

The boards of Inventure and Utz unanimously voted to proceed with the acquisition.

The deal was announced in October, after a summer in which Inventure’s stock price briefly dipped below $3, as  earnings-per-share hit muti-year lows.

The stock had traded over $10-a-share as recently as Dec. 2016.

A media release announcing the merger noted that Inventure’s lenders under a 2015 credit agreement had consented in September to allow Inventure a temporary waiver with respect to certain financial covenants, and requirements regarding the delivery of audited financial statements without a going-concern opinion.

Those waivers were extended through Jan. 15, 2018, in light of the merger.

“Without this further extension of the temporary waivers beyond October 31st, the Company would have been in default of the EBITDA financial covenants under the Credit Agreement and the requirement to deliver audited financial statements without a going concern opinion,” the release states.

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