A well-known Baltimore veterinarian who sold $184,000 worth of Grow Group Inc. stock last week says he will file a class-action lawsuit today against the New York company, claiming its failure to disclose a rival offer from Sherwin-Williams Co. violated SEC regulations and cost investors money.
Kim J. Hammond, along with fellow investor Jeffrey Dell, says the lawsuit will be filed today in U.S. District Court in New York.
Last Tuesday, the day after Grow Group announced its $18.10 per share merger agreement with Imperial Chemical Industries PLC, Dr. Hammond sold 10,300 shares of the company's stock for $17.875 per share, the suit says.
On the same day, Mr. Dell sold 15,000 shares at $17.75 per share, according to the suit.
Two days later, in a filing with the Securities and Exchange Commission, Sherwin-Williams Co. disclosed that on April 28, it had urged Grow Group management not to agree to the ICI offer and that it had been seeking to acquire Grow Group for at least two months.
Grow Group's stock surged to $19.125 on Thursday, after the SEC filing, and closed at $20.50 yesterday, when Sherwin-Williams announced a hostile tender offer for $19.50 per share.
Analysts expect the price to go higher as the competing bids are raised.
Grow Group's failure to disclose Sherwin-Williams' interest in an acquisition "unlawfully and artificially affected the market price of Grow Securities," the suit says.
Had Dr. Hammond and Mr. Dell known of the competing offer, they would not have sold their shares when they did, according to the suit.
The suit, which names Grow Group, its president and board members, seeks unspecified damages for all Grow Group shareholders who sold the company's stock between April 29 and May 4.
The action by Dr. Hammond, who owns the Falls Road Animal Hospital, would not be the first by shareholders challenging the ICI-Grow Group deal.
Last Thursday, two New York shareholders sued to block the sale, charging that management agreed to sell the firm for less than it's worth in return for ICI's pledge to keep current management.
Those plaintiffs contend Grow Group is worth $22 to $24 per share.
And yesterday, Sherwin-Williams itself sued Grow Group, its directors and ICI in New York and Ohio, claiming Grow Group's board breached its duty to shareholders in approving the ICI merger.
The lawsuit also alleges that Grow Group's and ICI's Securities and Exchange Commission filings are defective and the proposed merger of Grow Group and ICI is illegal.