Foster takeover of Portec delayed
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An Allegheny County judge has put a temporary stop to L.B. Foster Inc.'s planned takeover of O'Hara-based Portec Rail Products Inc.
Common Pleas Judge Christine A. Ward issued the order Wednesday, just five days before the merger of the two companies was set to take place, in response to three class-action lawsuits that were filed by Portec shareholders challenging the merger.
At issue in the deal - in which L.B. Foster, a rail company based in Green Tree, agreed to pay $11.71 a share for a total of $112 million to obtain a controlling interest in Portec - was whether Marshall T. Reynolds, the chairman of Portec's board of directors, breached his fiduciary duty to shareholders when he failed to consider another takeover offer from a hedge fund or even tell other members of the company's board of directors about the offer.
Judge Ward agreed there were problems. "Mr. Reynolds did in fact breach his fiduciary duties, in part, by effectively preventing the entire board of directors from carrying out their own fiduciary duties," she wrote, something they failed to do because he never told them of the other, potentially higher, offer from Ameridan Resources LLC of the North Side.
L.B. Foster first proposed buying Portec in June 2009. The judge found that most members of the board of directors of Portec did not learn of the impending sale until December after one member, Kirby Taylor, had worked out the details of the sale with L.B. Foster.
The judge said in her decision that Mr. Reynolds and Mr. Taylor testified that they were concerned that L.B. Foster would rescind its offer if they slowed down the merger to check market conditions and find out if the stockholders were getting a good deal.
"Portec offered no explanation for the lack of a market check or any effort to find an alternative buyer once Foster first proposed to buy Portec in June 2009 and Mr. Reynolds and Mr. Taylor entered into negotiations," she wrote.
Judge Ward ordered that the sale may not go through until the court determines the company has shown it received the best offer it could.
Federal regulators in the Department of Justice also are reviewing the sale for antitrust issues, a procedure that is common in such deals. In March, regulators requested additional information.
First Published April 22, 2010 12:00 am
