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AmTrust’s $40 Million Agreement Ends Take-Private Deal Challenge

Nov. 23, 2021, 6:47 PM

The investors that challenged a take-private buyout by the founding family of AmTrust Financial Services Inc. won a Delaware judge’s approval for their $40 million settlement resolving allegations that the deal was “grossly unfair” to non-insiders it squeezed out.

Vice Chancellor Lori W. Will signed off Monday on the deal, which ends litigation in Delaware’s Chancery Court over claims that the billionaire Karfunkel family, CEO Barry Zyskind, and members of AmTrust’s board intentionally tanked its stock price to soften the ground for the transaction.

The agreement, first disclosed in an August court filing, includes $9.6 million in legal fees for the pension funds and other institutional investors that led the shareholder lawsuit.

The agreement is “fair, reasonable, and adequate, and in the best interests of the class, and is hereby approved,” Will wrote.

The ruling comes nearly two years after former Chancellor Andre G. Bouchard, who stepped down in May, let the suit advance with claims that Zyskind and the Karfunkels propped up AmTrust’s stock price by cooking its books until a year before the buyout, then let it plunge as they prepared for the deal.

The transaction was originally challenged by billionaire activist investor Carl Icahn, who dropped his claim when the price was bumped up from $13.50 to $14.75 a share. AmTrust’s stock was allegedly worth about $13 at the time, down from a high of $27.

The investors were represented by Prickett, Jones & Elliott PA; Labaton Sucharow LLP; Grant & Eisenhofer PA; Saxena White PA; Kessler Topaz Meltzer & Check LLP; Friedman Oster & Tejtel PLLC; Wolf Popper LLP; and Bernstein Litowitz Berger & Grossmann LLP.

Zyskind and the Karfunkels were represented by Paul Weiss Rifkind Wharton & Garrison LLP. Other AmTrust board members were represented by Richards Layton & Finger PA and Willkie Farr & Gallagher LLP.

The case is In re AmTrust Fin. Servs. Inc. Stockholder Litig., Del. Ch., No. 2018-0396, 11/22/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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