Top managers and directors of Greenhill & Co., which in May announced a $550 million deal for Mizuho Financial Group Inc. to buy the investment bank, failed to disclose significant financial information to investors, according to a shareholder lawsuit.
(Bloomberg) — Top managers and directors of Greenhill & Co., which in May announced a $550 million deal for Mizuho Financial Group Inc. to buy the investment bank, failed to disclose significant financial information to investors, according to a shareholder lawsuit.
The shareholder alleges in the suit, filed Thursday in Manhattan federal court, that a proxy statement Greenhill filed on June 30 “misrepresents and/or omits material information that is necessary for the company’s stockholders to make an informed decision” on whether to vote for the deal.
The investor, Ryan O’Dell, especially criticizes Greenhill’s reliance on metrics such as adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, which isn’t recognized under Generally Accepted Accounting Principles.
Representatives of Greenhill and Mizuho didn’t respond immediately to requests for comment on the suit. Mizuho isn’t a defendant in the complaint.
Slide in M&A Ranks
Greenhill is currently ranked 71st in merger-and-acquisition advisory services this year, down from 49th last year. Before the 2007-2008 financial crisis, it ranked in the top 15. Founder Bob Greenhill had been a key deal-maker for prominent figures from Sandy Weill to Sumner Redstone.
Read More: Mizuho to Buy Investment Bank Greenhill in $550 Million Deal
Mizuho’s takeover would end a nearly two-decade run in public markets for the boutique investment bank, which went public in 2004 under Greenhill. If the deal closes, Greenhill Chief Executive Officer Scott Bok would continue to run the firm, which would retain its name within the Mizuho Financial Group. Bok and four board members are named as defendants in the suit.
Mizuho is joining its Japanese rivals to expand investment banking tie-ups in the US, though it’s going a step further in making an acquisition. Deal-making globally has slumped this year amid economic uncertainty and tougher financing markets, taking a toll on some M&A-focused advisers.
Missing Information
In faulting Greenhill for relying on metrics such as adjusted Ebitda, O’Dell says it failed to provide line items used to calculate the measures, or a way to reconcile the non-Generally Accepted Accounting Principles metric with its most comparable GAAP measure. He says values such as unlevered free cash flow are presented in the proxy analysis without the underlying metrics used to calculate those flows.
While he doesn’t say so outright in the suit, his demands for more information from Greenhill before shareholders vote on the all-cash transaction suggest he believes the investment bank could be worth more than Mizuho’s offer of $15 a share.
Before the deal was announced, Greenhill shares were trading below $7. After the announcement, they doubled. The shares closed at $14.74 on Thursday.
The case is O’Dell v. Greenhill, 23-cv-06020, US District Court, Southern District of New York (Manhattan).
–With assistance from Sonali Basak.
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