Shareholders Claim Reynolds America Pulled Fast One to Favor Merger

(CN) – A class action claims Reynolds America Inc. attempted to deceive shareholders so they’d vote in favor of the company’s merger with British American Tobacco.

The $49 billion dollar merger expected to be finalized in the third quarter of this year, pending that approval.

In a complaint filed in the Middle District of North Carolina on June 16, lead plaintiff Elizabeth Drew claims the Reynolds America board negligently filed an incomplete and misleading proxy statement with the Securities Exchange Commission.

Drew says the proxy failed to include information relating to the potential financial growth and the complete results of the company’s financial advisors’ analysis.

The class action says the omitted material is vital to the shareholders if they are going to make an informed decision on the merger before their scheduled vote on July 19.

The complaint says the proxy fails to define the accounting metrics used in calculating financial projections and anticipated cash flows.

Drew says the board also failed to include the line-items used to calculate unlevered after-tax free cash flows for corporations and the operating profit tax depreciation, amortization, capital expenditures, changes in working capital and other cash flow details.

Drew demands Reynolds provide the missing information to shareholders in a sufficient amount of time before the vote or postpone the vote until shareholders are adequately informed.

If the merger moves forward without providing the necessary information to shareholders, the complaint seeks to recover damages for alleged violations of the Security Exchange Act.

Drew is represented by Janet Ward Black of Greensboro, North Carolina, and James Wilson Jr., of Nadeem Faruqi in New York.

A representative of Reynolds America could not immediately be reached for comment.

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