Report: J. Crew $10 million settlement of TPG buyout suit unravels

New York City -- A report released Monday by Bloomberg said that J. Crew Group’s $10 million settlement of an investor lawsuit over the proposed takeover by private-equity firms TPG Capital and Leonard Green & Partners LP has fallen apart.

Citing a lawyer for the shareholders, the report said that J. Crew officials undermined a deal in which the clothier agreed to extend the period to solicit competing offers to the $3 billion buyout bid. The accord also included a $10 million payment to plaintiffs.

Executives of New York-based J. Crew have “sent the signal to the world that they are investing all resources in closing the deal with TPG as soon as possible and nobody else should bother to bid for J. Crew,” attorney Stuart Grant wrote in a letter to Delaware Chancery Court Judge Leo Strine in Wilmington.

Shareholders had filed complaints questioning whether J. Crew CEO Mickey Drexler, who began negotiating with the buyout firms months before the deal became public, got a fair price from TPG and Leonard Green.

The parties agreed in a settlement announced Jan. 18 that TPG and Leonard Green would accept a smaller $20 million payment if J. Crew accepted a competing offer. The original $27 million fee, equal to about 1% of the purchase price, was already lower than the typical breakup fee. TPG and Leonard Green offered $43.50 a share for J. Crew on Nov. 23.

Disgruntled J. Crew investors will press ahead with their claims and seek a “significant monetary recovery after a trial,” Grant said in the letter.

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