(CN) — Virgin America’s $4 billion acquisition by Alaska Airlines undervalues the company, but is a fait accompli given Richard Branson’s limited voting rights, a class of shareholders claim in court.
Thomas Houston brought the complaint Thursday in Delaware Chancery Court against Virgin America’s chairman Donald Carty and nine other corporate officers.
Virgin America, a hip airline with black leather seats and purple mood lighting, is not a party to the complaint.
The lawsuit comes about a month after Virgin America reached an acquisition offer from Alaska Airlines in a deal that values the airline at $4 billion. Virgin American shareholders will receive $57 per share in cash, a 47 percent premium.
Houston said the deal will go through if just Virgin America’s two largest stockholders vote in favor of the acquisition.
Cyrus Capital owns 27.9 percent of the airline, which Alaska Airlines has “successfully locked up,” Houston says.
With Virgin America founder Richard Branson controlling another 22 percent of shares, Houston says Branson’s support alone means the merger “will be assured to occur because at least 49.9 percent of the shares will be a virtual certainty that the transaction will be approved.”
With the 1.2 percent of Virgin America’s stock controlled by members of the board, “the proposed transaction is already a fait accompli,” Houston’s complaint says.
In an interview with Deadline, Branson called Virgin’s sale “one of the most disappointing moments of my life.”
“For years we fought to create a decent airline in America, but the American authorities in their wisdom said because I have an English accent and that I’m born in England and not America, that I had to give up my voting rights (in the company), so I could have 20 percent voting shares,” he told Deadline.
Under U.S. law, no more than 25 percent of a U.S. airline may be owned by foreign interests.
Houston said the acquisition off undervalues Virgin America, unjustly enriches company officers and severely limits the board’s ability to recommend any competing offer.
He seeks to enjoin the merger, plus damages for breach of fiduciary duty.
The class is represented by Derrick Farrell is Faruqi & Faruqi in Wilmington, Delaware.
Virgin America shares closed at $55.71 on Friday. The airline did not immediately respond to a request for comment.
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