Not two days after the deal was announced, a potential legal challenge has been raised to Flow International’s proposed sale to American Industrial Partners. A unanimous endorsement of the deal came from directors of the Kent-based publicly-traded firm Wednesday.
This morning, shareholder rights attorneys at Robbins Arroyo LLP are investigating whether the board of directors is taking a fair process to obtain maximum value and adequately compensate its shareholder in the merger that would pay $4.05 per share and take Flow private. They note this price is a premium of just 8.6 percent based on Flow’s closing price on Wednesday, substantially below the median one-day premium of 34.4 percent.
The law firm noted recent management report of earnings for first quarter that exceeded analyst net income expectations for the 10th consecutive quarter. Flow CEO-President Charley Brown also reported encouraging signs of growth and realization of savings from recent cost-cutting. Taken together, this information raised the questions by the lawyers.
Flow shareholders have the option to file a class action lawsuit challenging the proposed merger, and San Diego's Robbins Arroyo LLP would appear to be ready to consider handling such a case.
The proposed merger was expected to close in early 2014.