Del Monte Corp. and Barclays Capital proposed a cash settlement of $89.4 million with Del Monte’s shareholders on Thursday to resolve a dispute over Barclays’ questionable ethics when advising Del Monte to sell to private equity firm Kohlberg Kravis Roberts & Co. (KKR) last November.
The shareholders’ lawsuit was unique because it listed both the bank and company as defendants instead of the company itself. According to the Wall Street Journal, the settlement is one of the largest for shareholders challenging M&As.
Delaware Chancery Court Judge J. Travis Laster first ruled on the case in February. Laster said the U.K. bank exhibited conflicting interests when counseling Del Monte to sell its company, as it was advising the company at the same time it was financing the buyers—a practice termed “staple financing.” Judge Laster stated in his decision that Barclays “secretly and selfishly manipulated the sale process to engineer a transaction that would permit Barclays to obtain lucrative buy-side financing fees.”
Del Monte and Barclays have denied any wrongdoing, but according to Thursday’s court filing, they are settling to avoid litigation costs. Del Monte will pay the majority of the settlement, with $65.7 million, and Barclays will pay the remaining $23.7 million.
The settlement may spur the investment-banking community to rethink its staple-financing practices, as many Wall Street banks routinely partake in both the buying and selling sides of takeover deals to attain the maximum amount of revenue, the Wall Street Journal reported.
To read more on this settlement, read the Wall Street Journal.