All lit up…

November 16, 2006

candle.jpegYesterday, private equity firm Madison Dearborn Partners received antitrust approval from the Federal Trade Commission to acquire Yankee Candle (YCC). The $1.4 billion deal was announced on Oct. 25. And while the company’s largest investor gave its’ blessing at the time, another group of investors are not quite as happy with receiving $34.75 a share, judging by the preliminary proxy Yankee filed this morning. In the filing, Yankee notes that the suit, which seeks class action status, was filed against both Yankee and Madison on the day the merger was announced and "alleges that Yankee and its directors breached their fiduciary duties to Yankee stockholders…by failing to properly value Yankee, failing to take steps to properly maximize the value of Yankee by failing to adequately solicit alternative potential acquirers and favored Madison Dearborn due to loyalty of current management". The suit seeks an injunction preventing the completion of the merger, though the filing also notes that the defendant, whose last name is listed as Schwartz, has not yet filed to stop the merger.

Though it’s hard to say whether there were other, better deals for Yankee, it is clear from the merger proxy that Yankee’s directors and officers will do well as a result of the deal with Madison. Chairman and CEO Craig Rydin, who joined the company in April 2001, has a deal worth nearly $14 million, including $7.7 million worth of vested and unvested options, or roughly 20 times his annual salary of $726K. While the deal was clearly a premium over where Yankee had been trading recently, you only have to go back to the two year chart to see that Madison’s deal is in the same neighborhood that Yankee was trading in back then.

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