Class action: Catamaran OK'd UnitedHealth acquisition to benefit execs, not shareholders

By Dana Herra | May 28, 2015

Schaumburg-based Catamaran Corp. is facing a class action lawsuit brought by a shareholder who claims Catamaran’s acquisition by UnitedHealth Group Inc. benefits the company’s board of directors and top executives at the expense of shareholders.

Shareholder Leslie Katz has named the company and each of the board’s nine members as defendants in the action filed in U.S. District Court in Chicago.

In the suit, Katz claims Catamaran failed to get top dollar for the company when it accepted UnitedHealth’s bid, from which shareholders will receive $61.50 per share of stock. Katz asserts another bidder offered between $64.50 and $67.50 per share, but the board of directors “failed to properly pursue” that bid “given their own self-interests and that of the company’s senior management.”

According to court documents, upon completion of the acquisition, Catamaran Chairman and CEO Mark A. Thierer will become the chief executive officer of OptumRx, UnitedHealth’s pharmacy care service business, and Catamaran Executive Vice President Jeff Park will become OptumRx’s chief operating officer. The members of the board will receive a total of more than $4.1 million in vested stock options and other benefits, and Catamaran’s senior management will receive nearly $100 million in options.

Katz says the preliminary proxy presented to shareholders for their vote is “materially misleading,” failing to properly disclose the company’s 2014 earnings and grossly underestimating potential earnings for 2015. The proxy also doesn’t tell shareholders whether Thierer and Park were offered positions with any competing bidders, or when and on what terms they were offered positions with UnitedHealth.

Catamaran is among the largest providers of pharmacy services and information technology to the health care industry. UnitedHealth provides health care coverage and health care information technology services.

On March 29, Catamaran announced its $12.8 billion acquisition by UnitedHealth. The $61.50 per share price to shareholders was 27 percent more than the shares had been trading for the previous trading day, but the lawsuit claims shareholders could have gotten as much as $6 more per share had Catamaran’s directors and senior management agreed to sell to a higher bidder who did not offer the same level of perks to top executives.

The suit also claims the proposal sent to three other bidders contained onerous restrictions and requirements far beyond what was being discussed with UnitedHealth, “clearly directed at skewing any bidding process.”

Two of the companies eventually withdrew from talks, and the third unnamed bidder offered between $64.50 and $67.50 per share in an all-cash transaction. Since talks with that bidder were initiated several months after UnitedHealth had already begun its process, it could not meet the deadlines imposed by Catamaran, and the board voted to go with UnitedHealth’s offer.

In his filing, Katz seeks to enjoin the final acquisition until a new proxy disclosing all of the information cited as relevant in the case is produced and distributed to all shareholders. He has asked for a jury trial. The attorneys for the plaintiff are Norman Rifkind and Amelia S. Newton of Chicago; and the Grant Law Firm, PLLC and Abraham, Fruchter & Twersky, LLP, both of New York. The case number is 15-cv-4513.

The class-action suit is similar to one filed in Cook County Court in April by Catamaran shareholder Barry Hintze. The Hintze suit names the same nine directors, Catamaran, and UnitedHealth Group as defendants. That case, 15-CH-05676, is due back in court Aug. 4.

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