Chinese meat processor Zhongpin is being investigated for possible violations of state law after its chairman and CEO offered to take the company private in a share buy-out.
US securities law firm Tripp Levy has said it is investigating the board of directors of Zhongpin for “possible breaches of fiduciary duty and other violations of state law” in connection with the proposal to take the company private from Xianfu Zhu.
Zhu is offering US$13.50 per share in a preliminary proposal announced yesterday (27 March), valuing the US publicly-listed company at around $520m.
The chairman currently owns around 17.5% of the company’s stock, making him Zhongpin’s largest shareholder.
The company said its board will form a special committee to consider the proposal. “There can be no assurance that any definitive offer will be made, that any agreement will be executed or that a transaction with Mr Zhu or any other transaction will be approved or consummated,” it said.
Tripp Levy, however, has said it will investigate the proposal, looking at whether the consideration to be paid to Zhongpin shareholders is “unfair, inadequate, and substantially below the fair or inherent value” of the company.
It will also consider whether Zhu is “taking advantage of his position” to purchase the company at an unfair price.