LSB Industries, Inc. (“LSB”) (NYSE: LXU) today announced that the U.S. District Court for the District of Kansas issued its order entering judgment for LSB and against Jayhawk Capital Management and its affiliates (the “Jayhawk Group”) on all claims asserted by the Jayhawk Group in the previously disclosed lawsuit brought by the Jayhawk Group against LSB in connection with LSB’s exchange offer and thereafter LSB’s redemption in 2007 for its Series 2, $3.25 Convertible Exchangeable Class C Preferred Stock (the “Series 2 Preferred”).
In 2007, LSB completed an exchange offer for all of its outstanding Series 2 Preferred at a rate of 7.4 shares of common stock for each share of Series 2 Preferred exchanged and thereafter redeemed the remaining outstanding balance of its Series 2 Preferred. The Jayhawk Group alleged that it should have been able to exchange all of its Series 2 Preferred in the exchange offer, notwithstanding a separate written agreement between LSB and the Jayhawk Group in which the Jayhawk Group agreed to exchange only approximately one-half of its shares of Series 2 Preferred. The lawsuit alleged fraudulent inducement and fraud, violation of the federal and Kansas securities laws, breach of fiduciary duty, and breach of contract. The Jayhawk Group sought damages of approximately $12 million, based upon the additional number of shares of common stock it allegedly would have received if Jayhawk had been allowed to exchange all of its Series 2 Preferred in connection with the 2007 exchange offer, plus punitive damages. In addition, the Jayhawk Group alleged that LSB breached its contract by not paying the Jayhawk Group approximately $4 million in accrued and unpaid dividends upon the Jayhawk Group’s conversion of its remaining Series 2 Preferred in connection with LSB’s redemption of the balance of its Series 2 Preferred. The court entered a judgment in favor of LSB on all of the claims made by Jayhawk Group in the lawsuit. The court’s opinion is available via Lexis at 2012 U.S. Dist. LEXIS 133429.