Shareholder Sues GLG, Challenges Man Deal

May 25 2010 | 12:04pm ET

A GLG Partners shareholder has sued the hedge fund, arguing that its deal to be acquired by the Man Group undervalues its shares.

The deal would create the world’s largest hedge fund manager, with some $63 billion in assets, at the expense of GLG’s investors, Ron Duva alleges. “The timing of the proposed transaction has been engineered to take advantage of a recent decline in the trading price” of GLG shares, the lawsuit, filed in Delaware Chancery Court, claims.

Man has agreed to pay $4.50 per share for GLG, a 55% premium to its stock price when the deal was announced on May 17. It’s still more than GLG shares are trading for today, about $4.22, and only slightly below its 52-week high of $4.61. But that is still less than half what GLG shares were valued when the firm went public on the New York Stock Exchange via a reverse-merger.

Duva’s lawsuit also alleges that the Man deal “contains provisions designed to entrench management and deter alternative offers,” specifically challenging both the $48 million breakup fee that GLG would have to pay if it backs out of the deal, and the provision paying GLG executives in Man shares rather than in cash, as other GLG shareholders will be paid.

GLG called the lawsuit “entirely without merit.”

Man is paying $1.6 billion for GLG, which manages $23.7 billion.

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