Under Armour has reached a settlement with shareholders who sued over plans to create a new class of stock without voting rights, clearing the way for the company to move ahead with an unusual stock split.
The board of the Baltimore-based athletic apparel brand approved terms of the settlement Monday, the company said Wednesday in a filing with the U.S. Securities and Exchange Commission.
The lawsuit in Baltimore Circuit Court alleges that the company's board breached its fiduciary duty to shareholders. It seeks to block the company's plan to give owners of each existing share of common stock one new share of the new class.
The structure was designed to preserve founder and CEO Kevin Plank's personal control over Under Armour even as he sells off some shares. In August, the company had agreed to delay the split until the lawsuit was resolved.
Under the settlement, the company will issue a dividend valued at $59 million — or nearly 33 cents a share — to holders of the new Class C stock, a payment intended to make up for any potential discount in the trading price of Class C stock compared with Class A common stock in the initial distribution.
The dividend will be paid in Class A stock, Class C stock, cash or some combination to be determined by the board, though it's expected the board will make the payment mostly in Class C stock, Under Armour said.
The settlement also expands the noncompete agreement Plank will sign as part of the stock-split plan, stipulating that Plank can be in violation of the agreement if he fails to "devote the time necessary to the performance of his duties as CEO."
And if more than a specified number of Class C shares are used in certain acquisitions, the company's independent board members "must consider the effects of using those shares of Class C stock on the holders of Class A stock and upon the company," the company said in its SEC filing.
The company and shareholders plan to file documents disclosing additional details of the agreement in the coming weeks. The agreement requires approval by the court.
Under Armour shares closed down 81 cents at $99.05 each on Wednesday.