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HomeFed Board, Jefferies Settle Buyout Challenge for $15 Million

Oct. 14, 2021, 6:41 PM

Affiliates of Jefferies Financial Group Inc. and former board members at HomeFed Corp. will pay $15 million to resolve a proposed investor class action challenging the real estate developer’s $194 million take-private buyout in 2019, according to a Delaware Chancery Court filing.

The two sides disclosed the settlement in a joint filing late Wednesday, about 16 months after then-Chancellor Andre G. Bouchard—who retired earlier this year—let the lawsuit advance with claims that HomeFed board members linked to Jefferies disloyally engineered an underpriced transaction.

The Jefferies and HomeFed affiliates, who “continue to deny all allegations of wrongdoing, fault, liability, or damage,” settled solely to “eliminate the uncertainty, burden, inconvenience, expense, and distraction of further litigation,” according to the court filing.

The investor plaintiffs likewise took the deal not because their claims lack merit but because it’s “fair, reasonable, and adequate,” especially “when compared to the risk and uncertainties of continued litigation,” the agreement says.

The $15 million will be paid by “the defendants or their respective insurers,” according to the filing, which doesn’t include more specifics. Class counsel for the stockholders will seek up to 23% of the settlement, which comes to about $3.45 million, they said.

The consolidated shareholder suit, filed in August 2019, took aim at the 2-for-1 all-stock deal the previous month that made HomeFed a wholly owned subsidiary of Jefferies, which had owned about 70% of it.

Bouchard let the case move forward in July 2020, saying HomeFed’s board had undermined its own attempt to implement the kinds of protections for minority investors that can shield a deal from serious court scrutiny.

Although the board nominally required the approval of an independent negotiating committee and a “majority of the minority,” its side deals with two institutional investors rendered those devices ineffective, the judge found at the time. He did, however, toss the claims against certain board members.

The settlement requires the approval of Vice Chancellor Lori W. Will, who’s been presiding over the dispute since Bouchard stepped down and she joined the court in May.

Labaton Sucharow LLP and Andrews & Spring LLC are co-lead counsel for the investors, who are also represented by deLeeuw Law LLC, Friedman Oster & Tejtel PLLC, Kaskela Law LLC, and Wolf Popper LLP.

Jefferies and its affiliates are represented by Ross Aronstam & Moritz LLP and Weil, Gotshal & Manges LLP. Other HomeFed directors are represented by Morris, Nichols, Arsht & Tunnell LLP and Sheppard, Mullin, Richter & Hampton LLP.

The case is In re HomeFed Corp. Stockholder Litig., Del. Ch., No. 2019-0592, settlement filed 10/13/21.

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

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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