An unnamed investor in Kayak shares is filing a class-action lawsuit to stop the proposed buyout of Kayak by Priceline at a value of approximately $40 per KYAK share, according to San Diego-based investor advocacy group Shareholders Foundation.
It's not uncommon for billion-dollar acquisitions to draw shareholder suits, which rarely scuttle transactions. The Kayak/Priceline transaction is valued at $1.8 billion.
A law firm specializing in shareholder lawsuits, Powers Taylor of Dallas, had been attempting to find investors who might be harmed by the acquisition, but declined to issue a statement. Ditto for The Briscoe Law Firm, another such firm in Texas.
The lead plaintiff is unknown but in these types of lawsuits is often an institutional investor, though anyone who bought shares during the class period would automatically be a member of the class without having to do anything.
According to a release:
The plaintiff alleges that the defendants breached their fiduciary duties owed to KYAK stockholder by agreeing to sell the company too cheaply and via an unfair process.
The plaintiff claims that the offer is unfair to KYAK stockholders and undervalues the company.... via an unfair process.
It seems that the issue is the size of premium paid by buyer in light of the company's growth, anticipated operation results, net asset value and future profitability.
In other words, was there enough "upside" based on trailing price-to-earnings ratios and similar financial metrics since Kayak's IPO as well as financial forecasts by market-makers and analysts?
A Priceline spokesperson declined to comment. Kayak didn't respond to our request for comment by press time.
Looking at the numbers
Investors may be asking themselves if the $40 price is fair. A 29% percent premium over the the price per share on the day of the transaction is fairly good for recent large acquisitions in the US.
Investors may also be asking the fairness question.
But investors looking for even more financial reward than they had previously expected may not want to hold their breath. These types of lawsuits have a poor track record of success in the courts, except when companies were shown to be engaging in improper accounting practices.