Knight Capital Group Inc. (KCG:US), the trading firm that closely avoided bankruptcy this year after computer errors, was sued by an investor who contends the stock is undervalued in a $3.75-a-share takeover by Getco LLC.
Knight directors are duty-bound to seek out the best price for company shares and “locked-up” the Getco deal in violation of those duties, shareholder Ann Jimenez McMillan said in a Delaware Chancery Court complaint made public today.
The price is “unfair and grossly inadequate,” and will deny investors “their right to share proportionately and equitably in the true value of the company’s valuable and profitable business, and future growth,” the plaintiff’s lawyers said in court papers.
Chicago-based trader Getco agreed to buy Knight, based in Jersey City, New Jersey, earlier this month in a $1.4 billion deal, beating rival suitor Virtu Financial LLC, according to people familiar with the bidding.
Knight lost more than $450 million in August when improperly installed software triggered unintended orders. Getco and five other financial firms provided $400 million to help Knight in exchange for convertible securities representing more than 70 percent of its equity.
In the lawsuit, McMillan asks for class-action, or group status, on behalf of all outside stockholders, unspecified damages, and an order to stop the deal under its present terms.
Knight spokeswomen Kara Fitzsimmons and Nicole Weiss didn’t immediately reply to voice and e-mail messages seeking comment on the lawsuit.
Knight rose 2 cents to $3.51 in New York Stock Exchange composite trading at 1:35 p.m.
The case is McMillan v. Knight Capital Group, CA8163, Delaware Chancery Court, (Wilmington).
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