A Delaware court on Tuesday denied a request to block the $2.7 billion sale of insurer Delphi Financial Group to Tokio Marine Holdings Inc., brought by pension-fund investors who claim that Delphi’s CEO was unjustly enriched by the deal.
The suit targeted Delphi, Tokio, and Delphi CEO Robert Rosenkranz, who controls a 49.9 percent voting interest in Delphi and negotiated a non-binding deal for payment of a premium for his shares if the buyout goes through.
Although the judge ruled that the deal could proceed, arguing that shareholders should have an opportunity for an up or down vote, he said plaintiffs had a good chance of proving that Rosenkranz was not legally entitled to a premium for his stock even if he feels he is morally entitled to it.
“I find it in the best interests of the stockholders that they be given the opportunity to decide for themselves whether the Merger negotiated by Rosenkranz and the Director Defendants offers an acceptable price for their shares,” the judge, Delaware Chancery Court Vice Chancellor Sam Glasscock III, wrote in his opinion.
An attorney for the pension funds which brought the case said he was encouraged, however, by the judge’s opinion on the premium paid to Rosenkranz and the prospects for receiving future damages.
“We are pleased that the court recognized Mr. Rosenkranz’s overreaching,” Stuart Grant said in e-mailed statement.
Attorneys for Rosenkranz, Delphi and Tokio Marine could not immediately be reached for comment.
Tuesday’s opinion is one of the first major decisions Glasscock has issued since assuming the vice chancellor position last year.
Tokio Marine purchased another U.S. insurer, Philadelphia Å˽ðÁ«´«Ã½Ó³» Cos., in 2008.
[Tokio Marine is Japan’s second largest property/casualty insurer.
Delphi’s subsidiaries include Reliance Standard, a disability, life and dental insurance provider; Safety National Casualty Corp., which sells excess workers’ compensation and large casualty programs; and Matrix Absence management, an employee benefits management service.]
The case is: In RE Delphi Financial Group Shareholder Litigation, CA No. 7144, Delaware Chancery Court in Wilmington.
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