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Promega, CEO Linton Return Fire in Legal Battle with Shareholders

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has been rising in recent years.

According to lawyers for Promega, a 2013 assessment by Los Angeles-based Marshall & Stevens valued the company’s shares at $259 apiece. The price range for the Dutch auction in 2014 (between $233 and $272 a share) is in line with that valuation.

Promega held two stock buybacks in 2016, court records show. In the first repurchase period, the company bought back more than $51 million worth of its stock at an average share price of $382.98. In the second, Promega repurchased $28 million-plus worth of shares, and the average price was $406.53 a share. Those averages are below what Brand allegedly described as a “fair price” of $575 per share in a 2014 e-mail to Shain. (There is another scheduled stock buyback window, which opens on Nov. 1, according to the company’s counterclaims.)

Promega spokeswoman Karen Burkhartzmeyer says that on separate occasions in 2015, 2016, and 2017, the company commissioned independent firms to appraise Promega’s stock. Burkhartzmeyer declined to reveal the names of those firms, or the amounts they estimated Promega was worth. [An earlier version of this article incorrectly stated that the most recent independent valuation of Promega that the company views as credible was performed in 2013. We regret the error.]

Moreover, lawyers for Promega say that with the exception of one dividend paid to shareholders in 2007 following a court victory (that was unrelated to the current case), the company “had not paid dividends and did not plan to pay dividends in the foreseeable future”—a plan that the company’s management and board reiterated following the Dutch auction. Promega instead intends to continue retaining virtually all of its earnings in order to fuel the company’s growth, the company’s attorneys say. That could potentially have been one of the signals to Brand, Kellner, and others who filed suit last year that they would have a hard time turning their shares in Promega into cash in the future.

James Southwick, who leads the legal team representing Brand, Kellner, and other plaintiffs in the original lawsuit, declined to comment on the counterclaims attorneys for Promega filed last month. “The plaintiffs stand behind the claims made in their original complaint, and look forward to resolving their claims and the counterclaims in court,” Southwick says.

The plaintiffs in the case now have the opportunity to respond to the counterclaims, but must do so by Nov. 2. Judge Valerie Bailey-Rihn has not yet set a trial date in the case.

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