Robbins LLP: Acquisition of NewStar Financial, Inc. (NEWS) by First Eagle Investment Management May Not Be in Shareholders’ Best Interests
Robbins LLP is investigating the proposed acquisition of NewStar Financial, Inc. (NASDAQ: NEWS) by First Eagle Investment Management. On October 17, 2017, the two companies announced the signing of a definitive merger agreement pursuant to which First Eagle will acquire NewStar. Under the terms of the agreement, NewStar shareholders will receive $11.44 in cash plus a contingent value right worth approximately $0.88 to $1.00 for each share of NewStar common stock. This represents a total merger consideration of approximately $12.32 to $12.44 for each share of NewStar common stock.
Is the Proposed Acquisition Best for NewStar Financial Inc. and Its Shareholders?
Robbins LLP’s investigation focuses on whether the board of directors at NewStar is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $12.32 to $12.44 merger consideration represents a premium of only 1.6% to 2.6% based on NewStar’s closing price on October 16, 2017. This premium is significantly below the average one day premium of nearly 55.53% for comparable transactions within the past five years. Further, the merger consideration is significantly below the target price of $14.00 initially set by an analyst at Janney Montgomery Scott LLC on May 3, 2017 and reiterated as recently as August 2, 2017. In the last three years, NewStar traded as high as $13.98 on October 31, 2014, and most recently traded above the merger consideration – at $12.51 – on October 12, 2017.
Additionally, NewStar beat analyst estimates for revenue in three out of its last four quarters.
In light of these facts, Robbins LLP is examining NewStar’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
NewStar shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
NewStar shareholders interested in information about their rights and potential remedies can contact us via the form below and we will contact you directly.