ALBANY — A shareholder is trying to delay or block the proposed $1.1 billion sale of Albany-based e-commerce firm CommerceHub.
Faruqi and Faruqi LLP, of Manhattan, brought the case on April 27 in federal court in Albany on behalf of Brian Gordon, seeking class-action status on behalf of other owners of CommerceHub stock. Named as defendants are CommerceHub, members of its board of directors and co-founder Frank Poore.
The suit alleges violation of the Securities Exchange Act of 1934, saying a proxy statement issued by the company is “materially incomplete and misleading.”
CommerceHub did not respond to a request for comment for this story.
The company was founded in 1997 by Poore and Richard Jones, who remain the firm's chief executive officer and chief technology officer, respectively. On March 5, its board of directors agreed to sell CommerceHub to private-equity firms GTCR and Sycamore Partners for $1.1 billion. The deal valued the company’s stock at $22.75 per share. At the close of trading the day before the deal was announced, it was priced at $18.27.
The deal was expected to close in the third quarter of 2018, pending regulatory permission and approval by shareholders in a May 18 vote.
The proxy statement filed April 18, informing shareholders about the financial aspects of the company, is now the focus of Gordon’s lawsuit.
The Manhattan resident’s lawsuit alleges the proxy failed to disclose information necessary for shareholders to properly assess the fairness of the proposal, particularly financial projections for the company, the sale process and prior relationships between GTCR and CommerceHub’s financial adviser, Evercore Group.
It says the sale price appears inadequate in light of CommerceHub’s recent financial performance — double-digit sales growth in the past three fiscal years and positive net income growth in the past two — and its prospects for future financial growth.
The lawsuit calls for a jury trial and seeks:
- To block the defendants from holding the shareholder vote and taking any steps to consummate a merger unless and until the necessary information is disclosed to shareholders in advance of the May 18 vote.
- Certification of the case as a class action.
- To hold defendants accountable for damages sustained.
- Award of damages if the merger is consummated.
- The award of costs, fees and expenses to the plaintiff.
- Any other relief the court deems proper.
CommerceHub is headquartered in Albany, and most of its 320 employees work out of the ZEN building on the SUNY Polytechnic campus. Its leadership team and workforce are expected to remain in place after the acquisition.
CommerceHub is a hub for online commerce, connecting retail buyers, sellers and suppliers electronically. In 2017, it handled $16 billion worth of transactions for 50 client retailers ranging from Walmart to Walgreens to Whirlpool. Its business model is to arrange sale and shipment of goods through its clients’ websites without the client retailer ever having to touch the product. Instead, one of CommerceHub’s 11,000 suppliers fills the orders.
GTCR and a partner acquired Albany-based drug researcher/manufacturer AMRI in August 2017.
In October 2017, a shareholder filed a potential class-action lawsuit that alleges AMRI’s board of directors were acting in their own interests, but the shareholder withdrew the case in late December and it was formally dismissed in January.