Proposed Physicians Formula acquisition triggers law firm investigations
Law firms Robbins Umeda, Faruqi & Faruqi and Rigrodosky all announced yesterday that they were carrying out investigations into the proposed acquisition, a day after the announcement to sell the business was made.
The investigations have been made in the interest of existing investors in the Physicians Formula business and will centre on whether or not the share price is undervaluing the true net worth of the business.
In an official statement, law firm Faruqi & Faruqi pointed out that the estimated value of $65m was undervaluing the real market worth of the company, in turn undervaluing the existing investors’ stakes in the business.
Law firms are contending proposed sale price
“Under the terms of the proposed transaction, Physicians Formula’s stockholders will receive $4.25 in cash for each share of Physicians Formula common stock they own, while according to Yahoo! Finance, at least one financial analyst has set a price target of $5.00 for Physicians Formula,” stated Faruqi & Faruqi.
The law firm goes on to state that its investigation will try to determine whether or not board of directors at Physicians Formula had failed to conduct an adequate and fair sales process in the run up to the agreement, as well as determining if the proposed sale price undervalues the business.
Swander Pace said that the acquisition price represented a premium of approximately 15 percent on the closing price of the company’s shares before the deal was formalized.
Investment world reacted positively to sale
The investment world took positively to the announcement, with shares on the New York Stock Exchange rising by approximately 13 percent at the close of business yesterday.
Physcians Formula was established by Dr. Frank Crandall in 1937 and will continue to be run by the company’s existing management team, while maintaining the business in Azusa, California, as well as holding on the current employees.
The transaction will be subject to market regulatory practices and closing conditions as well as being subject to voting rights by a number of shareholders who have significant shareholder interest in the business.
Depending on the outcome of both the regulatory and law firm investigations, the transaction is expected to be completed towards the end of this year.