An investor in Harbin Electric, Inc filed a lawsuit alleging breaches of fiduciary duties by Harbin’s CEO and directors of Harbin arising out of their attempt to sell Harbin Electric, Inc too cheaply via an unfair process.
According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties owed to Harbin Electric, Inc. (NASDAQ:HRBN) investors in connection with the proposed takeover to take Harbin Electric private.
On Monday, October 11, 2010, Harbin Electric Inc. announced that its Board of Directors has received a proposal letter from Harbin Electric Chairman and Chief Executive Tianfu Yang and a fund advised by Baring Private Equity Asia Group Ltd. to acquire all of the outstanding shares of Harbin Electric, Inc. (NASDAQ:HRBN) they don't already own for $24 each.
Shares of Harbin Electric, Inc. (NASDAQ:HRBN), which traded before the announcement at almost $20 per share, increased in response to the takeover news in pre-market to $25.08 per share or by 25%.
But the plaintiff claims that the proposed purchase price is unfair and inadequate. HRBN shares traded as recently as April and January over $24 per share. In addition Harbin Electric’s 12 month revenue went from $40.42million in 2006 to $223.23million in 2009.
In addition the plaintiff alleges that the sale process is unfair to Harbin Electric shareholders. Chief Executive Tianfu Yang owns 31.1% and the directors and executive officer as a group control more than 35% of the Harbin Electrics stock, so the plaintiff.