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In what some might call a turning of the table, billionaire activist investor Carl Icahn has filed a lawsuit to stop the Karfunkel family, which has a controlling interest in AmTrust, from taking the insurer private.
Icahn's lawsuit alleges that the Karfunkel family is seeking to transfer "huge amounts of value" through a share purchase at a time when the insurer is poised to recover from its recent setbacks. On Icahn's own website, he explains that the deal price the Karfunkel family proposed is less than half of what the share price was about a year ago. The way Icahn sees it, particularly with him owning nearly 10 percent, this just isn't fair (to him and other "minority" shareholders).
Details of the Deal
As Bloomberg reports, the privatization buyout comes after a turbulent year. In addition to an SEC investigation, the insurer also faced controversy over their restatement of earnings and the discovery of financial/accounting issues.
Icahn's lawsuit alleges that the privatization deal "blatantly disadvantages minority shareholders." He calls the privatization efforts "an opportunistic attempt to take control of a company at historic lows, right before a period of expected recovery and possible earnings growth." He further alleges that the Karfunkel family and Barry Zyskind (AmTrust's CEO and founder) have "manipulated the record date, which could result in a shareholder vote that severely tilts the playing field [to their] advantage."
And while takeovers, and oustings, are not often a friendly affair, as Icahn - who is no stranger to litigation -- certainly knows, there's a fighting chance the Delaware court will agree that the AmTrust deal just isn't fair. Icahn is asking the court to apply the stringent "entire fairness" standard rather than the usual business judgment standard, as this deal goes beyond the usual unfairness of a shareholder vote.