An activist shareholder has sued Atlas Air Worldwide Holdings Inc. to block a proposed $5.2 billion merger until the Purchase-based company discloses more information.
Shiva Stein claims that the Atlas board of directors violated federal securities laws,  in a complaint filed Oct. 7 in U.S. District Court, White Plains, when it provided incomplete and misleading information in a proxy statement.
“It is imperative that the material information that has been omitted from the proxy statement is disclosed” before stockholders vote on the proposed merger, she said, so that they can “properly exercise their corporate suffrage rights.”
“We believe that the complaint is without merit,” Atlas spokesperson Debbie Coffey said in an email, “and that no further disclosure is required to supplement the proxy statement under applicable laws.”
Atlas operates the world’s largest fleet of Boeing 747 cargo jets. It delivers cargo worldwide, provides charter passenger flights to the U.S. Military and other customers, leases aircraft, and offers support services such as flight simulator training. It employs about 4,000 people.
Atlas booked about $4.4 billion in revenue and a 10.6% profit in the past 12 months.
On Aug. 4, it announced plans to take the publicly-traded company private.
A consortium of private equity funds — affiliates of Apollo Management Holdings, J.F Lehman & Company, and Hill City Capital — would acquire the company.
Atlas would be merged into a new company as a wholly owned subsidiary and would retain the same executive team, led by current CEO John W. Dietrich.
The deal would be financed by Apollo Capital Management, Barclays, Credit Agricole, Goldman Sachs and Mizuho Bank.
Stockholders would be paid $102.50 per share, representing a 57% premium on a 30-day average trading price as of July 29, or $65.28. Shares were selling at $100.09 as of end of trading on Monday, Oct. 17.
Stein, of Bergen County, New Jersey, was the second most prolific securities plaintiff from 2018 to 2020, according to an article published by Reuters news service in April 2021. She filed 124 securities lawsuits in federal courts, second only to the U.S. Securities and Exchange Commission.
Reuters found that she typically alleges inadequate proxy disclosures after a company has announced a merger.
As in this case, she has been represented by Manhattan attorney Gloria Kui Melwani, who has a decades-long record of advocating for shareholders.
The proxy statement, filed on Oct. 7, asks shareholders to support the deal.
Stein claims that the proxy contains misleading information about financial projections prepared by its financial advisor, Morgan Stanley & Co. (in whose Purchase office building Atlas is based).
She says that a cash flow analysis, for instance, does not disclose inputs and assumptions. A comparison of comparable publicly-traded companies does not include the financial metrics for each company. And the fee Atlas will pay to Morgan Stanley is not revealed.
Financial projections are highly-prized disclosures, the complaint states.
“Investors can come up with their own estimates,” Stein said, in quoting a 2007 Delaware Chancery Court ruling. “What they cannot hope to do is replicate management’s inside view of the company’s prospects.”
She is asking the court to stop the proposed deal until more information is disclosed.
