Heartland Value Fund Files Lawsuit to Block Rainforest--Landry's Merger
MILWAUKEE, Mar 27, 2000 (BUSINESS WIRE) -- Heartland Value Fund (HRTVX,
"Heartland"), the holder of approximately 6 percent of Rainforest Cafe, Inc.
("Rainforest") common stock issued and outstanding, announced today that it has
filed a class action lawsuit in the Minnesota District Court to block the
previously announced acquisition of Rainforest by Landry's Seafood Restaurants,
Inc. ("Landry's"). The lawsuit names as defendants Rainforest and the members of
its board of directors who considered and approved the Landry's merger, and is
brought on behalf of all holders of Rainforest common stock. A special meeting
of Rainforest shareholders to consider this transaction has been set for April
18, 2000.
"We have undertaken this action to ensure that the interests of all public
shareholders are protected as a result of any acquisition of Rainforest Cafe,"
says William J. Nasgovitz, founder and president of Heartland Advisors and
co-manager of the Heartland Value Fund. "We simply feel that the structure of
the agreement between Landry's and Rainforest fails to provide adequate
shareholder value and, furthermore, raises serious conflicts of interest issues
which have prevented Rainforest's board of directors from objectively fulfilling
its responsibilities to all of the company's shareholders."
The lawsuit alleges that each member of the Rainforest board of directors
suffers from disabling conflicts that prevent them from acting in the best
interests of the shareholders of the company in considering this transaction, in
violation of Minnesota law. The suit also alleges that these conflicts result
from monetary benefits that are being provided to the directors of Rainforest,
to the exclusion of the public shareholders of the company, including the
following:
- Landry's will pay a total of $6 million in cash to four of the six
members of the Rainforest board upon consummation of the merger,
separate and apart from the consideration that Landry's will
provide for shares of Rainforest common stock. None of the
recipients of these payments excluded themselves from
consideration of the proposed merger. In fact, two of the
recipients--Chairman and CEO Lyle Berman and Senior Vice President
Steven Schussler--are required to vote in favor of the merger with
Landry's even if a better offer materializes.
- Rainforest will pay $2 million in cash to Lakes Gaming, Inc. upon
consummation of the merger, as the result of the termination of an
earlier merger agreement between Rainforest and Lakes. Lyle
Berman, in addition to being chairman of Rainforest, is chairman,
CEO, and a controlling shareholder of Lakes, and is joined on the
Lakes board by Rainforest directors David Rogers and Joel Waller.
The lawsuit alleges that these conflicts have produced a merger agreement that,
at a current value of approximately $4 per share, not only provides an unfair
price to the Rainforest public shareholders, but also deprives them of
protections that ordinarily should be included in this type of business
combination. For example, the merger agreement contains a "no shop" provision
that largely prevents the Rainforest Board from considering better and higher
offers for the company.
The merger agreement also requires the Rainforest board to submit the proposed
merger to a vote of the shareholders regardless of the emergence of a better and
higher offer, and further requires Rainforest directors Berman and Schussler,
who collectively control more than 10 percent of the Rainforest common stock
outstanding, to vote in favor of the Landry's merger. Further, the merger
agreement does not include a "majority of the minority" provision, where
approval of the Landry's merger would be limited to a vote of those shareholders
unaffiliated with the conflicted members of the Rainforest board or Lakes
Gaming.
The lawsuit further alleges that the "no shop" provision already has harmed
Rainforest shareholders. On March 14, Rainforest disclosed for the first time
that it had received an inquiry from an unidentified third party interested in
acquiring the company, but that the board had concluded that it was not
permitted to pursue discussions with this party under the merger agreement.
The lawsuit seeks to
- enjoin or prevent the merger with Landry's from occurring; and
- compel the directors of Rainforest to take appropriate measures to
maximize shareholder value, which includes considering better and
higher offers for the Company.
Heartland has further indicated that, based upon the information currently
available, it intends to vote against the proposed merger.
Founded in 1982 by William Nasgovitz, Heartland Advisors, Inc. has established
its position as America's Value Investor, both through its family of equity and
fixed income funds, and through separately managed accounts for institutions and
individuals. As of Dec. 31, 1999, Heartland Advisors has $2.7 billion in assets
under management, $1.1 billion of which reside in the Heartland Value Fund.
Heartland is represented in this action by the law firm of Bernstein Litowitz
Berger & Grossmann LLP. Further information concerning this lawsuit can be
obtained from Robert S. Gans, a member of the firm.
Heartland Advisors, Inc., distributor. Member SIPC.
Distributed via COMTEX.
Copyright (C) 2000 Business Wire. All rights reserved.
CONTACT: Heartland Advisors:
Doug Lucas, 414/977-8792
dlucas@heartlandfunds.com
or
External Counsel:
Robert S. Gans, 800/380-8496
robert@blbglaw.com
KEYWORD: WISCONSIN
INDUSTRY KEYWORD: CLASS
ACTION
LAWSUITS
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