Hanover Going Private? Not So Fast, Say Shareholders

Two shareholders have filed a class action lawsuit against the move to take multititle cataloger Hanover Direct private.

The suit, filed in the Court of Chancery of the State of Delaware in and for New Castle County, alleges that the defendants breached their fiduciary duty to Hanover shareholders and seeks class certification, an injunction of the going private transaction, rescission and rescissory damages if the transaction goes forward, and unspecified damages and costs.

The plaintiffs in the case, Glenn Freedman and L.I.S.T., named Hanover Direct, Chelsey Direct, Stuart Feldman, William B. Wachtel, Wayne B. Garten, Paul S. Goodman, Donald Hecht, David Brown, and Robert Masson as defendants in the suit. Patricia Weiser, the plaintiff’s attorney, would not comment on pending litigation. In a March 7 company release, Hanover said it not yet been served with the lawsuit and believes it has no liability in the case.

The suit stems from the Feb. 27 announcement that Weehawken, NJ-based Hanover Direct received a proposal from Chelsey Direct, its largest shareholder, to take the company private—but at a far-from-premium price. Chelsey Direct offered to acquire all shares of company stock it doesn’t already own for $1.25 a share. On Feb. 23, the day the offer letter from Chelsey was dated, the share price had opened at $2.10 and closed at $2.75.

Chelsey Direct already owns approximately 69% of Hanover Direct’s common stock and 100% of the company’s Series C preferred stock; it controls 91% of the voting shares of Hanover, according to documents filed with the Securities and Exchange Commission. In the offer letter, Chelsey says it wants to take Hanover private due to the financial drain and what it sees as limited benefits of remaining a public company. Hanover’s board of directors has not yet reviewed this proposal.

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