Delaware judge approves settlement in which Del Monte and Barclays Capital will pay US$89.4M to settle shareholder lawsuits over food maker's sale earlier this year to investor group led by Kohlberg Kravis Roberts

Nevin Barich

LOS ANGELES , December 1, 2011 (Associated Press) – A Delaware judge on Thursday approved a settlement in which Del Monte Corp. and Barclays Capital Inc. will pay $89.4 million to settle shareholder lawsuits over the food maker's sale earlier this year to an investor group led by Kohlberg Kravis Roberts & Co.

Vice Chancellor J. Travis Laster signed off on the settlement at a hearing Thursday, rejecting arguments by an Ohio pipefitters union pension fund that it should be allowed to opt out of the settlement in order to pursue a lawsuit in California alleging that the private equity firms involved in the deal violated federal antitrust laws.

Laster refused to include an opt-out provision in certifying the shareholders as a class. He said the union's antitrust claims were based on the same facts as those in the Delaware case and had been considered by attorneys for the shareholders in reaching the settlement. The judge also noted that the union had yet to file an amended complaint in California following the dismissal of its antitrust lawsuit by a federal judge in August.

"It's abundantly clear ... that this court has the power to release those types of claims," said Laster, noting that while the settlement precludes further shareholder litigation over the buyout, it would have no effect on an ongoing investigation by the Justice Department's antitrust division.

"This is a settlement that provides excellent consideration for the class," Laster added.

In return for being released from further legal claims by the shareholders, Del Monte agreed to pay $65.7 million in cash. Barclays, which served as Del Monte's financial adviser in its buyout, agreed to contribute $23.7 million in cash.

Attorneys for the shareholders will receive $22.3 million of the settlement, a percentage Laster said was appropriate.

In challenging the $4 billion buyout, shareholders claimed that the directors of San Francisco-based Del Monte, whose brands include Contadina tomato products and Kibbles 'n Bits, Meow Mix and Milk-Bone pet foods, breached their fiduciary duty and misled investors. They also accused Barclays of having a conflict of interest because, in addition to advising Del Monte, the London-based bank provided some of the buyers' financing.

Investors led by KKR, Vestar Capital Partners and Centerview Partners agreed last year to buy the food maker for $19 per share and to assume $1.3 billion in debt.

But the deal hit a snag in February, when Laster delayed a shareholder vote to approve it, ruling that Barclays had misled Del Monte's board, colluded with the private equity firms and "secretly and selfishly manipulated the sale process" in order to obtain "lucrative buy-side financing fees."

Laster cited a series of improper action by Barclays, including not disclosing its behind-the-scenes efforts to put Del Monte into play and secretly pairing up KKR with Vestar Capital Partners, the highest bidder in a previous round of acquisition talks. That pairing of the two firms violated confidentiality agreements that prohibited Vestar and KKR from discussing a joint bid without written permission from Del Monte, he wrote.

Although Laster delayed the shareholder vote to give other potential buyers a chance to bid, none did, and the deal closed in March.

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