CLAYTON, Mo. (CN) – RehabCare officers breached their duty to shareholders by selling the company too cheaply to Kindred Healthcare, shareholders say. Kindred’s acquisition of RehabCare “serves no legitimate purpose for RehabCare but rather is an attempt by defendants to aggrandize their own financial interests,” according to the class action in St. Louis County Court.
Named plaintiff Alfred Kowalewski says RehabCare’s stock rose rapidly, from $12.45 a share on March 3, 2009 until it peaked at $34.88 a share on Jan. 19, 2010. The stock leveled off and was selling at $25.47 a share on Feb. 7, 2011, the day before the announcement of the acquisition.
The $1.3 billion buyout offer was $26 a share, plus 0.471 Kindred shares per RehabCare share.
“While the consideration offered to RehabCare’s public stockholders represents a 37.55 percent premium to the closing share price on the day prior to announcement, this does not reflect the true value of the company or its prospects for future growth,” the complaint states.
“In contrast, Kindred and the individual defendants stand to reap substantial benefits from the proposed transaction. On February 7, 2011, on the day before the announcement of the proposed transaction, the compensation committee of the board approved a grant of 46,393 shares of restricted stock worth a total of $1.25 million to defendant [John] Short, the president and CEO of RehabCare. … Short’s restricted shares will vest immediately upon the consummation of the proposed transaction. These restricted shares are in addition to at least $11 million in potential change-in-control payments to Short.
The class wants the acquisition blocked, and a better deal. It is represented by Jeffrey Schmitt of Danna McKitrick.
RehabCare, Kindred and eight RehabCare officers are named as defendants.