(CN) - Staples shareholders claim in a class action that the proxy statement for Sycamore Partners' pending $6.9 billion buyout of the office-supply giant did not adequately disclose potential conflicts of interest among Staples board members who approved the deal.
Filed in federal court in Massachusetts, the lawsuit says shareholders will not be in a position to cast an informed vote on the merger if the proxy statement is not amended to fully disclose what "post-transaction employment and merger-related benefits" were discussed when the multibillion-dollar deal was being ironed out between Staples and private equity group Sycamore.
The class wants the proxy statement to specify whether Staples' management secured any post-closing employment contracts for themselves, and whether Sycamore mentioned retention benefits in earlier buyout proposals.
The proxy statement notes that "the officers of [Staples] immediately prior to the effective time of the merger will be the initial officers of the surviving corporation."
The company maintains: "Discussions between Sycamore and the Company's management regarding the terms of the Company's management employment following the closing have not taken place as of the date of this proxy statement."
Furthermore, shareholders object to the proxy's description of nonparties Barclays and Morgan Stanley's financial analyses and fairness opinions for the buyout. The pleading identifies a supposed lack of disclosure in the proxy's description of the firms' discounted cash flow figures.
The merger, announced June 28, was the culmination of months of negotiations involving multiple prospective bidders, according to the company's SEC filings.
Sycamore made a $11.50-per-share buyout proposal in late May, but by June 23, it had lowered its bid to $10-a-share, according to the complaint. The parties landed on the final $10.25 figure after Staples consulted with Barclays and Morgan Stanley.
The buyout price represented a roughly 12 percent premium to Staples' stock closing price on the day before the merger was announced.
At the time of the announcement, Staples Chairman Robert Sulentic said the deal was "the result of a comprehensive process in which our Board, with the assistance of a transaction committee comprised of independent directors, and outside financial advisors, explored and considered various alternatives to enhance value for our stockholders."
"Staples' Board believes that this process has led to a transaction which is in the best interests of our stockholders, as well as Staples and its employees," Sulentic said.
In recent years, Staples has faced stagnant share prices, and declining revenue, which the company has attributed in part to competition from online retailers. Its planned merger with Office Depot fell apart after a judge sided with the Federal Trade Commission in an antitrust case over the deal in May 2016.
The class is represented by Mitchell Matorin in Wellesley, Mass., and by Richard Acocelli, Michael Rogovin and Kelly Keenan of Weiss Law in New York.