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Midas Investors Can’t Challenge Done Deal

CHICAGO (CN) - A federal judge dismissed shareholder claims over TBC Corp.'s $310 million acquisition of Midas, noting that the done deal moots objections.

Jacob Scheiner filed a class action in April 2012, seeking to halt Midas' proposed merger with TBC Corp.

Midas operates and franchises more than 2,300 auto shops in 15 countries, while TBC is one of the largest sellers of auto tires in the United States. It runs Big O Tires, Tire Kingdom and other outlets, according to the TBC website.

The Midas board unanimously approved TBC's buyout offer, for $11.50 a share, or $310 million, plus "the assumption of approximately $137 million in debt and pension liabilities," on March 12, 2012, according to the complaint.

Scheiner claimed this price was too cheap, and that Midas financial adviser J.P. Morgan Securities gave an untrustworthy opinion because of its "enormous financial interest in TBC's parent company Sumitomo."

U.S. District Judge Edmond Chang nevertheless dismissed Scheiner's case Tuesday, finding it moot because the tender offer period has expired and the merger is now complete.

"Where, as here, the tender period has expired and the plaintiff has failed to put the brakes on the tender by moving for a preliminary injunction and requiring corrections to the 14D-9, a § 14(e) claim for injunctive relief is moot," Chang wrote.

The merger closed in the last week of April 2012.

Chang also found that Scheiner is not entitled to damages because he cannot show that relying on the alleged misstatements of Midas caused him to suffer losses.

"A shareholder (like Scheiner) who does not tender his shares during the tender offer period but later seeks damages under § 14(e) must show that he relied on the alleged misrepresentation in not tendering," he wrote.

"Here, Scheiner filed the present lawsuit before the deadline to tender his shares had passed, and before he could have relied on the alleged omissions in Midas's 14D-9. A plaintiff who is aware of a purported omission prior to a tender offer does not have a claim 'under ... [a] securities law requiring proof of reliance, because [he] w[as] never deceived,'" Chang added (parentheses in original).

In addition: "The complaint does not set forth individual allegations of scienter as to each of the individual defendants."

"The only individual defendants that are mentioned by name are [former CEO Alan] Feldman and [Board Member Robert] Schoeberl, but even these allegations fail to give rise to a 'cogent and compelling' inference of scienter," Chang ruled.

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