Investors File Lawsuit in Response to Possible Builders FirstSource RestructuringSeptember 28th, 2009 by Editor
Robotti & Co. LLC and its affiliates have been appointed to lead an investor lawsuit filed in response to a recapitalization plan for Builders FirstSource Inc. proposed by JLL Partners Equity IX LP and Warburg Pincus Private Equity IX,LP. The proposed plan by JLL and Warburg would dilute the interests of all shareholders by issuing over 95 million shares of new stock at just $2 per share, substantially devaluing the remaining outstanding shares of common stock held by public investors, according to a press release issued by Robotti. The Robotti Companies own or control more than .2 million shares of Builders FirstSource, or almost 7 percent of the outstanding stock held by the non-controlling public, according to a press release from Robotti.
“We believe that this highly dilutive plan offered by the two largest stakeholders is not in the best interest of Builders FirstSource or its outside stockholders,” says Robert E. Robotti, president of Robotti Co. Advisors, managing member of Ravenswood Management Company LLC. “This is a low-ball deal proposed by JLL and Warburg to further increase the proportion of equity they own in the company at the expense of outside minority shareholders.”
According to the complaint, filed with the Court of Chancery in Delaware, the Robotti Companies allege that JLL Partners and Warburg Pincus purchased almost 35 percent of Builders FirstSource’s outstanding debt at highly discounted rates, and now are attempting to use this leverage to force Builders FirstSource to agree to a recapitalization plan that not only will provide them a windfall profit on their debt purchases, but also will increase their equity stake in the company while diluting the non-controlling stockholders.
“This is an opportunistic play, and has needlessly crushed the value of Builders FirstSource’s outstanding stock,” Robotti said.
JLL and Warburg currently own approximately 50 percent of the outstanding common stock of Builders FirstSource and have six of their own employees appointed to the company’s ten member Board of Directors. Immediately following the announcement of the proposal on September 1, 2009, share prices in Builders FirstSource fell drastically from $7.69 per share to $4.27 per share, the press release pointed out.
The Robotti Companies have retained leading securities litigation and corporate governance law firm Grant & Eisenhofer, P.A. to represent them.