Dallas, Texas 10/30/2013 (Financialstrend) – Edgen Group Inc (NYSE:EDG) is an industrial equipment wholesale reseller and distributor. It has a market cap of close to $216 million and annual sales adding up to $1.89 billion. In the past 30 days the stock has posted close to 58% increase in its market value. This can be directly linked to the October 1 announcement that New York registered Sumitomo Corporation of America has come forward to buyout the equipment distributor through its subsidiary Lochinvar by paying out $12 for each share of common stock issued by the company. The offer price by the Japanese parent company translated to a 57% premium on the $7.6 price the stock was trading on September 30.
In addition to the merger agreement with Edgen, Sumitomo along with its 100% owned subsidiary Lochinvar have also executed binding agreements with institutional investor companies “Edgen Murray II, L.P., and Bourland & Leverich Holdings LLC”. These two investment firms were in turn controlled and operated by Jefferies Capital Partners. This consortium owned 24.3 million class B shares which had been issued by Edgen. As per the agreement, these class B share holding firms would provide a letter indicating their approval of the agreement that Edgen and Sumitomo had signed on October 1. If the deal does get regulatory approval, Sumitomo will shell out close to $1.2 billion to close out the merger.
In spite of the over 50% premium at which the stock has been evaluated for the take over many laws firms have come forward to investigate the modalities of how the merger price was determined by the directors of the Board of Edgen Group. On behalf of the share holders, the law firms are alleging that the directors have failed in discharging their fiduciary obligations by not trying to safeguard shareholder interest with respect to future prospects of the distributor firm