Bloomberg: Mudrick Enters Round Two With Globalstar Over Nixed Merger
Fund’s suit filed under seal in Delaware Chancery Court
Globalstar canceled controversial deal targeted by Mudrick
(Bloomberg) -- Globalstar Inc. and its chairman are being sued again by the satellite-phone provider’s largest independent shareholder, the next chapter of a fight over a controversial merger.
Hedge fund Mudrick Capital Management filed the suit under seal in Delaware Chancery Court Wednesday to give both sides time to black out confidential information.
Globalstar canceled a $1.65 billion acquisition backed by Executive Chairman James Monroe III last month in the face of opposition from the hedge fund’s founder, Jason Mudrick.
“Plaintiffs assert claims for breaches of fiduciary duty, unjust enrichment and aiding and abetting,’’ Mudrick’s lawyers said in a public filing accompanying the complaint, which in addition to the company and Monroe, names other directors as defendants. “Plaintiffs allege that such actions occurred through a blatant pattern of misconduct orchestrated by Globalstar’s then-CEO, Executive Chairman, and controlling stockholder, James Monroe III.”
A public version must filed within five working days under the court’s rules. A representative for Covington, Louisiana-based Globalstar didn’t immediately reply to a request for comment.
The public conflict between Mudrick and Globalstar stretches back to May, when the New York-based fund manager sued the firm seeking files about a planned combination with another company Monroe controls, claiming it amounted to “self-dealing." Globalstar was ordered to turn over emails and records related to the merger in July and the company called off the deal two days later.
Bad Blood
The bad blood between Mudrick and Monroe runs deep. The investor secretly recorded the chief executive in an April meeting in order, Mudrick said, to gather color about the merger that could be useful in future litigation.
Monroe has been defiant about the value of his proposed merger, which would have combined Globalstar with assets controlled by Monroe’s Thermo Cos. “The company remains convinced the merger offered all shareholders significant upside and mitigated downside risk,” the CEO said on an earnings call in August.
Delaware Chancery Judge Tamika Montgomery-Reeves concluded Globalstar officials must turn over files about the targeted deal so Mudrick and other investors could “investigate mismanagement, waste, or wrongdoing” in connection with the proposed combination.
Mudrick argued the nixed deal would have overvalued the assets Monroe controls, while paying for them with Globalstar stock. The fund manager also alleges the value of Globalstar’s shares were deliberately depressed when Monroe sold a large block of shares.
Mudrick was joined in his latest suit by Warlander Asset Management, a hedge fund said to be backed by billionaire investor David Tepper, a star money manager and the majority owner of the National Football League’s Carolina Panthers.
The case is Mudrick Capital Management v. James Monroe III, No. 2018-0699, Delaware Chancery Court (Wilmington).
