Updated from 7:22 p.m. EDT
A Tennessee court has temporarily blocked the acquisition of
by Warren Buffett's
, according to published reports.
reported that the Tennessee Court of Appeals issued the injunction Thursday and would rule Friday on the election. The wire service quoted attorney George Barrett, who represents the Denver Area Meat Cutters and Employers Pension Plan, as saying the court had stayed completion of the sale.
According to newspaper reports, the pension fund filed suit last week challenging the fairness of the deal, and, at the time, pension fund attorneys said they might challenge the fairness of the vote as well. The fund sought to have the suit become a class-action case that would include all shareholders.
Earlier Thursday, it was announced that votes were certified and the 52.4% of the outstanding shares voted in favor of the $1.7 billion buyout. Clayton shares did not trade Thursday and the deal was announced as being finalized.
"The merger has closed; the deal is complete," Carl Koella, treasurer at Clayton, told
Thursday evening. "The Denver Meat Cutters
have pursued an after-the-fact attempt to get the court to intervene. The court took the appeal under advisement today, and will decide tomorrow whether to even hear the appeal."
He declined to comment further other than to say: "It's business as usual at Clayton Homes."
The meat cutters' group, which has opposed the merger from the beginning, claims there were irregularities in the vote to approve the merger, according to press reports. The fund's suit claimed the sale was motivated by the Clayton board's desire to help Chairman Jim Clayton, who owns 28%, and his son, Clayton CEO Kevin Clayton. Another investor, Orbis Investment Management, owner of 5.3% of Clayton, told a Knoxville newspaper that they were contemplating a suit as well.
One institutional source, who requested anonymity, suggested the surprising adjournment of the original shareholders meeting on July 16 could be at the crux of the pension fund's claim. At that time, Clayton announced that about 64 million shares (reportedly about 4 million shy of the necessary total to approve the merger) voted to adjourn the meeting. The company also said it didn't count the ballots on the merger itself.
The source, who also opposed the merger, suggests that Clayton's ability to identify a number of shareholders voting to adjourn suggests it did indeed count the votes, and the company decided to adjourn the meeting out of fear it might fall short of required votes to approve the merger. (The $12.50-a-share offer was approved by shareholders at a subsequent meeting on July 30.)
"Several of our institutional investor clients have expressed frustration with the process and felt like the company knew the outcome of the vote at the time of the so-called postponement," agreed Greg Taxin, CEO of Glass Lewis, a San Francisco-based research firm that recommended shareholders of Clayton Homes vote against the merger.
One question being pondered is whether this Tennessee court has jurisdiction over Clayton, which is domiciled near Knoxville but incorporated in Delaware. Apparently, similar appeals were dismissed by Delaware courts. However, the fact that the Tennessee court is even contemplating the appeal suggests it believes it has jurisdiction, legal sources said.
Real Money contributor Christopher Edmonds contributed to this story