NEW YORK (
recent announcement to sell its student loan subsidiary to
Discover Financial Services
is getting a bit of pushback from shareholders.
Citi is being sued by one investor who thinks the big bank shortchanged shareholders in efforts to get a deal done between
The Student Loan Corp.
and Discover. Shareholder Alan Kahn said in a complaint filed Monday in Delaware Chancery Court in Wilmington that the deal was "underpriced," given Citi's need to sell assets, according to
Kahn says Student Loan's board is violating duties to get the best price for the business and wants an injunction to stop the acquisition as well as class action status for the case,
cited court documents.
Citi said in a statement: "We believe this lawsuit is without merit, and we intend to vigorously defend our position."
Separately, at least three other law firms are investigating potential legal claims against Student Loan's board of directors related to the acquisition.
According to a press release Tuesday from Dallas-based Briscoe Law Firm and Powers Taylor say the lender's book value has been estimated as high as $65 per share. Student Loan shares hit a 52-week-high of $52.18 in November.
"Based on historical share values and other aspects of the proposed agreement, the investigation concerns whether the proposed share price is fair to Student Loan/STU shareholders," the joint release said. "In addition, the investigation relates to possible breaches of fiduciary duty and other violations of state law by the Board of Directors of STU for approving this transaction and whether STU's Board of Directors acted in the shareholders' best interests."
Brodsky & Smith of Bala Cynwyd, Pa. announced on Monday that it was investigating Student Loan for similar reasons.
Discover agreed on Friday to acquire
for $600 million, or $30 a share. The deal price amounted to a 42% premium to Student Loan's closing price on Thursday. Citi owns 80% of the private student lender, while the other 20% is public.
The deal was heralded by shareholders on Friday. Student Loan's stock surged 41% that day. Still the deal may face
by FinReg's new Consumer Financial Protection Agency.
Citigroup shares fell 1.2% to $3.94 on Tuesday on slow volume of 375 million shares. Student Loan shares, after surging on Friday due to news of the deal, ended the day down slightly to $29.90.
--Written by Laurie Kulikowski in New York.
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