MIDAS: Are Shareholders Getting the Shaft?

Midas operates and franchises more than 2,300 auto shops in 15 countries.

TBC, Owned by Japanese parent Sumitomo Mitsui Financial Group Inc., is one of the largest sellers of auto tires in the United States.

TBC runs Big O Tires, Tire Kingdom, and other outlets.

Palm Beach Gardens, Florida-based TBC has made a bid for Midas that totals about $173 Million, a deal that includes the assumption of $137 million in debt and pension liabilities by TBC.

Midas’ Board of Directors accepted the bid, but shareholders are suing to block the deal.

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In Freedman v. Midas Inc., (CA7346, Delaware Chancery Court – Wilmington). shareholder Glenn Freedman alleges Midas directors accepted the deal put their own own self-interest ahead of Midas shareholders’ best interests.

The lawsuit alleges that Chief Executive Officer Alan Feldman and other Midas directors are reaping big rewards for supporting the deal.

Courthouse news, reporting on the class action lawsuit in which lead plaintiff Jacob Scheiner has sued Midas, TBC Corp., Gearshift Merger Corp., J.P Morgan Securities and five Midas officers, in Federal Court., states:

"It is especially egregious that the individual defendants, in breach of their fiduciary duties owed to plaintiff and the class, did not seek a separate fairness opinion from an independent and unconflicted financial advisor …

"The Board – tasked with the unremitting duty to obtain the maximum price reasonably obtainable for Midas’ shareholders – simply had no business relying upon a financial advisor with such conflicts of interest."

Scheiner claims Midas’ executive management team will personally benefit from the merger at shareholders’ expense.

"Having decided to put itself up for sale in August of 2011, Midas insiders were interested in deal certainty to achieve their exit strategy and advance their own interest, in breach of their fiduciary duties and to the detriment of plaintiff and the class. Initiating a sham ‘auction’ process and tilting the subsequent process in favor of TBC (including reliance on an advisor beholden to TBC) was the surest path for insiders to secure their change in control payday," the complaint states.

Scheiner wants the deal enjoined, and class damages for violations of the Exchange Act, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty.

He is represented by Leigh Handelman with Pomerantz Haudek Grossman & Gross.

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