Shareholders of TeamHealth filed a class-action lawsuit Tuesday against the physician-staffing company, alleging it accepted an inferior takeover offer from the Blackstone Group when a much more lucrative bid had been on the table.
Shareholders also said the deal is rife with conflicts of interest that unfairly favor Blackstone as well as Goldman Sachs & Co., the investment bank that is serving as TeamHealth's financial adviser for the deal.
In October, TeamHealth and private-equity firm Blackstone agreed to a $6.1 billion buyout. Blackstone paid $43.50 per share of the publicly traded TeamHealth, which staffs hospitals with emergency room physicians, hospitalists and other specialty physicians.
However, in 2015, TeamHealth rebuffed multiple, higher bids from AmSurg Corp., a competitor in the field. In late 2015, AmSurg had offered a stock-and-cash deal worth $7.6 billion, or more than $71 per share, but TeamHealth rejected it. AmSurg ultimately backed out and merged with Envision Healthcare.
Shareholders allege the offer from Blackstone, which owned TeamHealth from 2005 through 2009, low-balled the value of the company. A financial analysis conducted by Goldman Sachs said TeamHealth could warrant a stock buyout as high as $74.65 per share or as low as $43.20 per share.
“The proposed transaction will deny class members their right to share proportionately and equitably in the true value of the company's valuable and profitable business, and future growth in profits and earnings,” the lawsuit reads.
Shareholders also argued TeamHealth's proxy statement on the merger is misleading and omits crucial information—like Goldman Sach's financial analysis and the fact that Goldman Sachs owns a significant amount of shares of Blackstone. Goldman Sachs, which TeamHealth is paying $18.4 million for its work tied to the merger, blessed the deal and called it “fair” in the proxy filing.
“When a banker's endorsement of the fairness of a transaction is touted to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed,” the lawsuit says.
TeamHealth declined to comment.
Shareholder lawsuits related to mergers and acquisitions are common. In 2015, shareholders sued in 84% of merger deals that were valued at more than $100 million, according to Cornerstone Research. Settlements and monetary awards in those cases is “relatively rare.”