Despite facing class-action lawsuits and more investigations related to its proposed sale, Life Time Fitness, Chanhassen, MN, announced today that it has received early termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).
According to Investopedia, the HSR Act is defined as:
"A U.S. law enacted by President Ford that requires large companies to file a report with the Federal Trade Commission and Department of Justice before completing a merger, acquisition or tender offer so that government regulators can determine whether the transaction would violate antitrust laws.
"The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires any investor seeking to acquire a 15% stake or a stake valued at more than $15 million in a security to file with the government. The form is called a premerger notification report (PNR), with the filing marking the beginning of the 30 day review. The acquiring company must also pay a filing fee which can change from year to year."
As announced last month, Life Time has entered into a definitive merger agreement under which affiliates of Leonard Green & Partners and TPG will acquire Life Time in a transaction valued at more than $4 billion. Other key investors include LNK Partners and Life Time Chairman, President and CEO Bahram Akradi, who will remain in his role and has committed to make a rollover investment of $125 million in Life Time common stock.
Under the terms of the merger agreement, the investors will acquire all of the outstanding shares of Life Time Fitness common stock for $72.10 per share in cash. The merger is subject to approval from Life Time's shareholders and other customary closing conditions. The transaction is expected to close in the third quarter of 2015.
The day the acquisition plan was announced, several law firms declared they were investigating the proposal on behalf of shareholders for possible breaches of fiduciary duty and other violations of law. Most of the firms were looking to see if Life Time failed to adequately shop the company around to maximize shareholder value. To date, more than 10 law firms are investigating the proposal.
Last week, Block & Leviton LLP, Boston, announced it had filed a class-action lawsuit against Life Time and its board of directors. The lawsuit, filed in the U.S. District Court in Minnesota, is on behalf of a class consisting of all current holders of Life Time securities.
The complaint alleges that, on April 3, Life Time filed with the U.S. Securities and Exchange Commission (SEC) a proxy statement recommending the proposed acquisition to Life Time investors that contained material omissions. Among other things, the proxy statement failed to sufficiently disclose the interest of the company's CEO in the proposed acquisition and the fair market value of the company's real estate holdings, which make up the bulk of Life Time's assets, according to the lawsuit. As such, the proxy statement omits material information necessary to make the proxy not misleading to investors attempting to evaluate the financial merits of the proposed acquisition.
The class action seeks to stop Life Time from proceeding with the acquisition until it has complied with the federal securities laws. In the event that the acquisition occurs, the class action seeks to recover damages on behalf of Life Time's investors. The law firm is seeking a shareholder to serve as the lead plaintiff.
A second class action lawsuit was filed yesterday by Levi & Korsinsky, LLP in Minnesota federal court.
Today, the law firm Robbins Arroyo LLP, San Diego, file a federal securities fraud class-action suit against Life Time. The suit alleges that the company and some of its officers and directors violated sections of the Securities Exchange Act of 1934. It says the company filed a false and misleading definitive proxy statement with the SEC in an attempt to secure shareholder approval of the proposed transaction. Specifically, the complaint alleges that Life Time's proxy statement misrepresented and failed to disclose, among other things:
- the full texts of the "Rollover Agreement" and "CEO Term Sheet" signed by Akradi, that govern the exchange of $125 million worth of shares in the company to the surviving operation and govern the terms of Akradi's continued employment as CEO of the surviving corporation, respectively;
- the true appraisal of the company's real estate holdings;
- the pre-existing relationship between the company's financial advisors for the proposed transaction and members of the consortium of investor purchasers; and
- that both Life Time's CEO and president signed a shareholder voting agreement requiring them to vote their shares of the company in favor of the proposed transaction, even if the board determines that the merger is no longer in the best interest of the company.
The complaint contends that the omitted and misrepresented information is material to Life Time shareholders' ability to make an informed decision whether to approve the proposed transaction.