Herman Miller Inc.’s highly praised $154 million acquisition in 2014 of high-end furniture retailer Design Within Reach Inc. may not legally have occurred. That’s according to a pair of former Design Within Reach (DWR) shareholders who filed a lawsuit in December 2014 against the company’s current and former owners. The lawsuit alleges the company violated Delaware law in how it executed a 1-for-50 reverse stock split, a move that predated its acquisition by Herman Miller.
While plaintiffs Andrew Franklin and Charles Almond name Herman Miller in the lawsuit, the pair appear to be using the office furniture manufacturer as leverage to put pressure on the former majority shareholders of DWR, according to a lawyer who spoke to MiBiz and asked not to be named in this report. The lawyer described the lawsuit as an “unusually messy situation.” For one, if the reverse stock split did not occur from a legal standpoint, it means Herman Miller purchased far fewer shares than was required to complete the 2014 acquisition of DWR under Delaware law, making the transaction null, according to multiple sources.
High-profile acquisitions can often bring about lawsuits from unhappy shareholders, but this deal appears to have some unique characteristics, said Christine Baker, managing director of business valuation services at Grand Rapids-based Charter Capital Partners. “I’ve heard of dissenting shareholder suits not infrequently,” Baker said. “But someone asserting that the deal never actually closed is a new one to us, especially for companies that have to report so much in a public way. That’s kind of stunning.” more