US pension plan sues Hart over Pactiv deal

Graeme Hart. Photo / Martin Sykes

The $6.3 billion takeover by Graeme Hart's Reynolds Group of Pactiv Corporation was challenged in a lawsuit by a trade union pension plan which called the deal "fundamentally unfair" to Pactiv shareholders.

Pactiv, the maker of hefty trash bags and takeaway packaging, its chairman, Richard Wambold, seven board members, Rank Group Investments and its Reynolds Group unit were sued in Illinois state court in Chicago by a plumbers and pipe-fitters union.

The US$4.5 billion ($6.3 billion) transaction was announced by Pactiv on August 17.

The per share price of $33.25 represents a 39 per cent premium over its $23.97 May 14 closing price before the disclosure of negotiations.

The acquiring Rank Group unit, manufacturer of Reynolds Wrap foil, is also taking on about US$1.5 billion in debt.

Pactiv had "excellent prospects for future growth", according to the complaint, which called the agreed price unfair.

The union said company directors breached their fiduciary duty to shareholders by undervaluing the company.

The pension fund seeks an order blocking the transaction until Pactiv's directors obtain the best possible price for shareholders.

They also want the court to certify the injured shareholders as a group for purposes of the lawsuit.

The company has more than 132 million outstanding shares.

Matthew Gonring, a spokesman for Pactiv, declined to comment. Petra Beck, a Winterthur, Switzerland-based spokeswoman for Reynolds could not be reached for comment.

Reynolds Group is controlled by Rank Group, which is owned by Graeme Hart, the wealthiest person in Australia and New Zealand.

Acquiring Pactiv would be the most expensive deal yet for the 55-year-old Hart, who built his fortune buying grocery, dairy and retail assets through closely held Rank Group.

- BLOOMBERG