A shareholder is suing Krispy Kreme Doughnuts, claiming the company failed to negotiate a fair deal when it agreed to be bought by a German firm for $1.35 billion.
Shareholder Barbara Grajzl is asking the court to stop the proposed deal until the company puts in place a process "to obtain the highest possible price for shareholders."
Krispy Kreme (NYSE: KKD) did not immediately respond to a request for comment on the lawsuit.
The lawsuit is similar to many that tend to follow the announcements of mergers and acquisitions, with assertions that the board should have secured a higher price per share or better terms prior to signing off on a deal.
It follows the May 9 announcement by Krispy Kreme that the publicly traded company would be taken private through its purchase by a subsidiary of JAB Holding Co., the investment arm for members of the billionaire Reimann family in Germany.
The terms of the deal call for JAB to pay $21 per share for Krispy Kreme, which closed at $16.86 on May 6, the last day of trading before the Monday morning announcement of the planned acquisition.
In her complaint originally filed in Forsyth County Superior Court and then transferred earlier this month to the N.C. Business Court, Grajzl claims that price undervalues the company given the way Krispy Kreme "is positioned for growth — expanding into new markets, remodeling brick and mortar stores and expanding products beyond its traditional menu."
Krispy Kreme's stock had been trading around $20 a share a year ago, but fell to near $13 a share in November. The price rebounded through the end of 2015 to above $15 a share before falling to the $13 mark again in early February.
The company's share price had generally climbed to around the $17 mark before the deal was announced. Shares have consistently traded around the $21 mark since the deal was announced in early May.
The complaint also alleges that Krispy Kreme has agreed to terms that give preferential treatment to JAB at the expense of shareholders, by creating a process that deters other interested parties from offering competing bids for the company.
Included in those terms are provisions that allow JAB a "matching right" to answer a competing offer and a termination fee of $42 million to be paid to JAB if Krispy Kreme were to go with another bidder.
"Accordingly, no rival bidder is likely to emerge and act as a stalking horse because the Merger Agreement unfairly assures that any 'auction' will favor JAB and piggy-back upon the due diligence of the foreclosed second bidder," the complaint alleges.
Grajzl is being represented by Lex Erwin and Matthew Hotgrewe of Erwin, Bishop, Capitano & Moss of Charlotte and James Ficaro of The Weiser Law Firm of Berwyn, Pa.