Shareholder John Thompson filed the lawsuit this week in federal court in Delaware against Wright Medical, its board of directors and Stryker, claiming that the solicitation statement that asks shareholders to approve the merger is incomplete and therefore misleading.
In particular, the claim says that the solicitation statement fails to disclose Wright’s financial projections, material information contained in Guggenheim Securities’ financial analysis of the proposed merger, and information about Wright’s agreement with J.P. Morgan Securities, which is also acting as a financial advisor for the merger.
“The omissions in the solicitation statement are material in that a reasonable shareholder will consider them important in deciding whether to tender their shares in connection with the proposed transaction,” the lawsuit says. “In addition, a reasonable investor will view a full and accurate disclosure as significantly altering the total mix of information made available.”
The suit names Stryker as a defendant because it had “direct supervisory control over the composition of the solicitation statement” and any alleged omissions.
A Jan. 2 Securities & Exchange Commission filing showed that the Federal Trade Commission had upped its scrutiny of the proposed merger. After Stryker filed a pre-merger notification and report form with the FTC on Dec. 16, 2019, the FTC sent a second request to the company with respect to the offer. Wright Medical also shared that it received a second request on Dec. 31, 2019. The second request is a discovery procedure performed by the FTC to investigate mergers and acquisitions that may have anticompetitive consequences.
As a result, the waiting period under the HSR Antitrust Act for the purchase of shares in the offer was extended to 11:59 p.m. Eastern time on the 10th calendar day following the date of the companies’ substantial compliance with the second request, unless that waiting period is terminated.
The two companies initially announced the proposed acquisition on Nov. 4, 2019. In the agreement, Stryker is slated to pay $30.75 per share and will acquire all of the issues and outstanding ordinary shares of Wright Medical for an equity value of $4.08 billion. With outstanding convertible notes, total enterprise value is set at $5.4 billion.
At the time of the announcement, the companies expected the acquisition to close in the second half of 2020.