Lone Star Funds, two major financial firms, and former senior leaders of Foundation Building Materials Inc. lost their bid Friday to end litigation challenging the drywall distributor’s $1.37 billion sale to American Securities LLC.
It’s “reasonably conceivable” Lone Star orchestrated the transaction to secure a payout that overvalued its tax receivable agreement with the company, in which it held a controlling stake, a Delaware judge ruled. The value of the pact—requiring Foundation to pay the investment firm 90% of certain tax savings—plunged after the 2017 tax law slashed the top corporate rate from 35% to 21%.
The allegations, if true, ...
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