Avis Budget Group, Inc. Discloses Suspicious Transaction
Robbins LLP is investigating Avis Budget Group, Inc. (NASDAQ: CAR) to determine whether certain Avis officers and directors violated securities laws and breached fiduciary duties to shareholders. Avis operates as a vehicle rental company.
Hedge Fund SRS Investment Management, now Avis’s largest shareholder, first bought shares in the Company in 2010. Over the years, SRS used its purchases of swaps to build a large stake and obtain representation on the Board. Pursuant to the Standstill Agreement the Company entered into with SRS in 2016, the Company increased the size of the Board to 12 directors and SRS appointed two new directors. In return, SRS agreed to vote its shares in favor of the Company’s Board nominees and other Board proposals and refrain from acquiring or taking a sympathetic long position in more than 20,000,000 shares of common stock.
On February 23, 2020, the Company and SRS entered into a third Standstill Agreement, scheduled to end on December 31, 2021. SRS agreed not to acquire beneficial ownership of more than 18,589,128 outstanding voting securities and agreed to vote its shares in favor of the Company’s nominees and other proposals at any meeting of the Company’s stockholders occurring during the standstill period.
Within the exhibits of a quarterly statement filed on November 2, 2021, the Company disclosed for the first time that in August 2021, SRS Mobility Ventures, LLC, an affiliate of SRS, had acquired a 33 1/3 % Class A Membership Interest in one of the Company’s subsidiaries for $37.5 million (the “Acquisition”).
However, the Company did not disclose the name of the Company’s subsidiary, anything regarding the process or negotiations culminating in the Acquisition, whether the Board explored any alternatives to the Acquisition, whether the Board retained or consulted with any financial advisors in connection with the Acquisition, or even the rationale behind the Acquisition. The lack of information is suspicious given that SRS is the Company’s largest shareholder, and two directors and the Company’s CFO are affiliated with SRS.
A month later, the Company and SRS entered into a second amendment to the Third Standstill Agreement, extending the standstill period until December 31, 2022. Without this amendment, SRS would have been able to increase its ownership of voting shares, nominate more than two candidates, and run an activist campaign to remove the remaining directors at the Company’s annual meeting in 2022.
We are investigating whether the Acquisition was unfair to the Company. The proximity between the Acquisition and the second amendment to the Third Standstill Agreement, and the lack of disclosures pertaining to the Acquisition could suggest that the Acquisition was consideration for the second amendment to the Third Standstill Agreement, which protected the members of the Board from removal, and that the Board approved the Acquisition under motives of entrenchment.
Avis Budget Group, Inc. (CAR) shareholders have legal options. If you own shares of Avis Budget Group, Inc. contact us for more information about your rights.
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