“The law firms are in it for themselves, not for the shareholders and as such we aren’t overly concerned with the law suits”, Purches told CosmeticsDesign.com USA.
“This is just a way for the legal companies to line their pockets rather than a genuine act out of concern for the shareholders.”
Breach of fiduciary duty
The Florida-based fragrance firm is being sued by more than ten different law firms following the announcement of its merger with Perfumania, on the grounds that the cash payout for common stock is not in the interests of the shareholders.
As part of the merger agreement, Parlux shareholders can either choose to receive, for each share of common stock, (i) $4.00 in cash plus 0.20 shares of Perfumania common stock, or (ii) 0.53333 shares of Perfumania common stock.
However, according to the law firms suing the fragrance company, in keeping with the merger agreement, a share of Parlux stock is valued to be between $7.91 and $8.55, assuming no adjustments other than the elections are made.
Go shop
Contrary to this, Purches told CosmeticsDesign.com USA that the company is in fact in the middle of a ‘go shop period’, which allows it to seek out competing offers even after receiving a firm purchase offer.
The go-shop period is meant to help ensure that the board of directors fulfills its duty to make sure shareholders get the best deal possible from the transaction.
In line with this, Purches has negated the reasons behind the law firms suing, taking up the position of an unconcerned CEO.
Law firms Bull & Lifshitz, Levi & Korinsky and Howard G Smith were unavailable for comment when approached by Cosmetics Design.