(CN) - Shareholders filed suit against Golfsmith for selling itself on the cheap to Golf Town, Canada's largest golf retailer.
Lead plaintiff Stephen Bushansky says the deal for $6.10 per share is a "mere 23-24 percent premium over Golfsmith's share price of $4.93 just three weeks prior to the announcement." Bushansky says that isn't nearly enough considering that since the beginning of 2012 and before the deal was announced Golfsmith's shares had risen by 50 percent on the "strong financial health" of the company.
Golfsmith was started in 1967 in the living room of Carl and Barbara Paul who saw a niche for custom made golf clubs. The company existed mostly as catalog business until 1995 when it began an aggressive retail expansion opening 76 stores by 2010. Golfsmith went public in 2006.
The suit alleges that the terms of merger agreement, including a $3.8 million break up fee and a no-shop provision makes it impossible for shareholders to realize the true value of the company.
Golfsmith also allegedly failed to disclose who holds outstanding options for company stock, making it impossible for shareholders to know if the price of those options influenced the directors' decisions to accept Golf Town's offer, the suit says.
Bushansky is represented by Marc Stanley, Martin Woodward and Scott Kitner with Stanley Iola LLP in Dallas.