(CN) - A class action says that LabCorp's $27 per share offer for Medtox, a firm that provides employee drug testing, is insufficient given Medtox's strong growth over the last year.
Lead plaintiff John Siciliano sued Medtox Scientific and five of its corporate officers in the County of Ramsey, Minnesota.
Medtox is an "industry leader in employment drug testing, toxicology reference laboratory services and clinical trials services," according to the complaint. LabCorp is an S&P 500 company with one of the largest clinical laboratory networks in the world.
On June 4, 2012, Medtox and LabCorp jointly announced that LabCorp would acquire Medtox for $27 per share, valuing the company at $241 million.
Siciliano claims that "a review of the company's recent earnings announcements and opinions issued by securities analysts indicate, however, the per share consideration - while representing a premium - is insufficient."
Medtox announced strong results for the first quarter of 2012, the complaint states. Compared to the prior year period, total revenues increased 13.9 percent, gross profit increased 20.8 percent, and operating income increased 91.4 percent.
"In light of the company's strong results, bright future, and being well positioned in a growing business space, the director defendants elected to 'cap' shareholder upside and sell the company. The director defendants' motivations are suspect given that 40 percent of the Board is interested. Mr. [Richard] Braun stands to receive millions in change of control payments and Mr. [Samuel] Powell's lucrative leasing arrangements likely will be assumed by LabCorp and his substantive stock position will be monetized," Siciliano claims.
In addition, "there is no evidence that the company was 'shopped' to other potential buyers, either strategic or financial, before agreeing to the proposed transaction."
Siciliano seeks an injunction to prevent Medtox's acquisition and damages for breach of fiduciary duty, and aiding and abetting breach of fiduciary duty.
He is represented by Karen Riebel of Lockridge Grindal Nauen.