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Hedge funds sue for higher price in Skechers deal

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Skechers shares dropped 30% before 3G Capital deal

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Greenberg family approved merger without shareholder vote

By Tom Hals

WILMINGTON, Delaware, Nov 20 (Reuters) - Investment

firms holding millions of shares of footwear giant Skechers

are suing for a better deal than the $63 per share

price paid by 3G Capital to take over the company in a $9.4

billion deal, according to court records.

Hedge funds including affiliates of AQR Capital Management

have filed suits against the company in Delaware's Court of

Chancery in a bid to get a higher price for their stock in what

is known as an appraisal action.

Investment firm 3G Capital announced the Skechers deal in May,

which was priced at about a 30% premium to the stock's price

prior to the deal.

At least five separate cases have been filed since the

merger closed on September 12 with more than 10 million shares

being appraised, according to court filings.

Skechers and the appraisal claimants have discussed

settlement terms without reaching a deal, according to a person

familiar with the discussions.

Skechers and 3G Capital declined to comment and an attorney

for appraisal claimants did not immediately respond to a request

for comment.

The 3G deal was announced after Skechers shares had dropped

nearly 30% this year as the company withdrew its annual results

forecast in April and warned of the fallout from tariffs imposed

by President Donald Trump.

The deal was approved by a committee of independent Skechers

directors, but shareholders were not given an opportunity to

vote on the merger. Instead, it was approved by written consent

of the founding Greenberg family, which controlled around 58% of

the voting stock, according to a securities filing.

Delaware corporate law generally allows for shareholders to seek

appraisal for their stock in buyouts, provided they vote against

the deal and other conditions. While there have been some

decisions awarding large payouts in appraisal cases, Delaware

judges often view the deal price as the fair price of the stock

in a well-run sale process.

Around a decade ago, hedge funds briefly seized upon an

"appraisal arbitrage" strategy in which they swooped in just

before a merger deal closed to buy shares so they could sue for

a higher deal price. Delaware lawmakers ended the trade by

changing the way interest accrued on the disputed shares.

There is also at least one class action case against the

company's board challenging the merger deal on behalf of all

minority investors in Skechers. The complaint alleges that the

deal was structured not to get the best price for Skechers

stock, but to allow the Greenbergs to cash out of some of their

stock and to remain part of the company's management.