Robbins Arroyo LLP: Acquisition of Zep, Inc. (ZEP) by New Mountain Capital LLC May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of Zep, Inc. (NYSE: ZEP) by New Mountain Capital. On April 8, 2015, the two companies announced the signing of a definitive merger agreement pursuant to which New Mountain Capital will acquire Zep. Under the terms of the agreement, Zep shareholders will receive $20.05 in cash for each share of Zep common stock.
Is the Proposed Acquisition Best for Zep and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at Zep is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $20.05 merger consideration represents a premium of only 17.3% based on Zep’s closing price on April 7, 2015. This premium is significantly below the average one-day premium of nearly 32.1% for comparable transactions within the past three years. Further, the $20.05 merger consideration is below the target price of $21.00 set by an analyst at Wunderlich Securities on February 9, 2015, and an analyst at Sidoti & Company LLC on March 4, 2015.
On April 8, 2015, Zep reported strong earnings results for its second quarter 2015. Specifically, Zep reported net sales, on a comparable basis, grew 3.8% to $160.1 million in the second fiscal quarter. In addition, the company reported earnings per diluted share were $0.01 compared to a loss of ($0.03) the prior year, while net income for the quarter was $162,000 compared to a loss of ($682,000) in the same period last year. Further, Zep beat consensus analyst estimates for sales in three out of its last four quarters.
In commenting on these results, Zep Chairman, President, and Chief Executive Officer John K. Morgan remarked, “I’m pleased to see a continuation of organic sales growth trends this quarter. Transportation-related end-markets continued to show strong growth while promotional activity drove increases in our retail home center business.”
In light of these facts, Robbins Arroyo LLP is examining Zep’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.
Zep 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.
Zep shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.