A Revlon Inc. investor who traded in his common stock for preferred shares and missed out on the firm’s October rally has filed a suit seeking class-action status against chairman Ronald Perelman and other Revlon officials for breach of fiduciary duty.
This story first appeared in the December 24, 2009 issue of WWD. Subscribe Today.
Also named in the action were vice chairman David Kennedy, president and chief executive officer Alan Ennis, the nine other members of Revlon’s board and MacAndrews & Forbes, Revlon’s majority shareholder and Perelman’s investment vehicle.
The suit, filed Monday in Delaware’s Court of Chancery, charges that minority shareholders should have been told about Revlon’s “stellar” third-quarter results before the exchange expired.
Steven Berns, Revlon’s executive vice president, chief financial officer and treasurer, said of the complaints: “We believe they were without merit and intend to defend” against the lawsuit “vigorously.”
The investor, Edward Gutman, exchanged 26,000 shares of Revlon common stock for preferred stock under the offer that expired Oct. 7. More than 9.3 million shares of Revlon common stock were exchanged under the offer, which concentrated Perelman’s control of the company. MacAndrews & Forbes now owns 78.9 percent of the company’s Class A and Class B common stock. M&A was accused of aiding and abetting the alleged breaches in a second count of the suit.
Just over three weeks after the exchange ended, Revlon said profits for the third quarter ended Sept. 30 fell 20.9 percent to $23.1 million, but income from continuing operations rose to $23.1 million from a loss of $15.2 million a year earlier. The results pushed the stock up 43.3 percent to $8.24 on Oct. 29. Revlon closed up 1.9 percent to $18.19 Wednesday.
“Despite the fact that the exchange offer closed a full week after the close of Revlon’s 2009 third quarter, its stockholders were not provided with material information about the company’s results possessed by defendants,” the complaint said.
Gutman, who is suing on behalf of himself and others who accepted the exchange offer, maintains that shareholders were entitled to the information as they decided whether or not to exchange their stock.