Judge Orders Tyson to Proceed with IBP Purchase

Also, SEC investigating network storage company's convertible offering, Cendant does a big deal, and more.

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A Delaware Chancery Court judge on Friday ruled that Tyson Foods Inc. must proceed with its $4.7 billion acquisition of IBP Inc. even though Tyson claims that it was denied information about financial problems at a subsidiary of the meatpacker.

Chancellor Leo E. Strine Jr. said Tyson “improperly terminated” its agreement with IBP.

Strine conceded that an alternative would have been to award damages to IBP, but that would have been impractical because it would have been “staggeringly large.”

Tyson is expected to appeal the decision.

If you recall, Tyson announced plans on Jan. 2 to buy IBP for $3.2 billion and $1.5 billion in assumed debt. However, it cancelled the deal in March, alleging that IBP had provided misleading information about the company’s value.

In a trial that focused heavily on how much IBP had informed Tyson about financial mismanagement at DFG Foods, the meatpacker’s canape and appetizer subsidiary, Tyson said it was surprised to learn that the SECD was investigating the unit.

However, IBP argued that it gave Tyson a thorough accounting of the troubles at DFG during their merger talks.

Procom’s Underwriting May Have Violated Securities Laws Regulators have told Procom Technology Inc., a network storage company, that a fee paid involving the sale of convertible debentures may not be consistent with U.S. securities rules, according to the company.

Procom disclosed in an SEC filing that it had paid Brighton Capital Ltd. $375,000 for being introduced to Montrose Investments LP, which bought Procom’s 6 percent convertible debentures. “The staff of the Securities and Exchange Commission has informed us that the receipt by Brighton Capital of this payment may be inconsistent” with the registration laws, Procom said in the third-quarter filing. “We might be subject to regulatory action.”

Procom said it may have to return the $15 million that the money manager paid for the debentures. It also may be able to recover the $375,000 it paid to Brighton.

In May, Procom agreed to sell 3.8 million common shares at $9 each, expecting $34.5 million in proceeds. It said $5 million would be used to pay in cash the $5 million principle of its 6 percent debenture, and $10 million to repay future obligations.

From the CFO.com “Brief” Case

  • Cendant Corp. said on Monday it would buy travel reservations systems supplier Galileo International Inc. for $2.9 billion. Cendant said it is offering $33 a share for Galileo and will assume about $600 million of Galileo debt.
  • The Chrysler unit of DaimlerChrysler plans to cut capital expenditure by about 40 percent, or $18 billion, over the next five years, according to FT.com.
  • Data Critical Corp., a maker of wireless systems and software for the health industry, said that it will lay off 60 employees, or 22 percent of its work force, and take a $3 million charge.
  • RMS Networks Inc., a provider of point-of-purchase advertising and information distributed by broadband satellite networks, withdrew its planned IPO.
  • Control Delivery Systems Inc., which develops sustained-release drug delivery products, said it will sell 5.4 million shares at $13-$15 a pop when it goes public.

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