Case 1:21-cv-05329-FB-TAM Document 1 Filed 09/24/21 Page 1 of 14 PageID #: 1
`
`Daniel Sadeh, Esq.
`HALPER SADEH LLP
`667 Madison Avenue, 5th Floor
`New York, NY 10065
`Telephone: (212) 763-0060
`Facsimile: (646) 776-2600
`Email: sadeh@halpersadeh.com
`
`Counsel for Plaintiff
`
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`
`
`Case No:
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`JURY TRIAL DEMANDED
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`
`
`YURIE HOBERG,
`
`Plaintiff,
`
`v.
`
`SANDERSON FARMS, INC., FRED
`BANKS, JR., DAVID BARKSDALE,
`JOHN BIERBUSSE, LAMPKIN BUTTS,
`MIKE COCKRELL, TONI D. COOLEY,
`BEVERLY HOGAN, EDITH KELLY-
`GREEN, PHIL K. LIVINGSTON,
`SUZANNE MESTAYER, SONIA
`PEREZ, GALL JONES PITTMAN, and
`JOE F. SANDERSON, JR.,
`
`
`Defendants.
`
`
`
`
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`
`
`
`
`
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`COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
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`Plaintiff Yurie Hoberg (“Plaintiff”), by Plaintiff’s undersigned attorneys, for Plaintiff’s
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`complaint against Defendants (defined below), alleges the following based upon personal
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`knowledge as to Plaintiff and Plaintiff’s own acts, and upon information and belief as to all other
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`matters, based upon, inter alia, the investigation conducted by and through Plaintiff’s attorneys.
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`NATURE OF THE ACTION
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`1.
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`This is an action against Sanderson Farms, Inc. (“Sanderson” or the “Company”)
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`and its Board of Directors (the “Board” or the “Individual Defendants”) for their violations of
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`1
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`Case 1:21-cv-05329-FB-TAM Document 1 Filed 09/24/21 Page 2 of 14 PageID #: 2
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`Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.
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`§§ 78n(a) and 78t(a), and Rule 14a-9 promulgated thereunder by the SEC, 17 C.F.R. § 240.14a-
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`9, in connection with the proposed acquisition (the “Proposed Transaction”) of Sanderson by
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`Walnut Sycamore Holdings LLC (“Parent”) and Sycamore Merger Sub LLC (“Merger Sub”), an
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`indirect wholly owned subsidiary of Parent.1
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`JURISDICTION AND VENUE
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`2.
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`The claims asserted herein arise under and pursuant to Sections 14(a) and 20(a) of
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`the Exchange Act (15 U.S.C. §§ 78n(a) and 78t(a)) and Rule 14a-9 promulgated thereunder by the
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`SEC (17 C.F.R. § 240.14a-9).
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`3.
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`This Court has jurisdiction over the subject matter of this action pursuant to 28
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`U.S.C. § 1331, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.
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`4.
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`Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) and Section 27 of
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`the Exchange Act (15 U.S.C. § 78aa(c)) as a substantial portion of the transactions and wrongs
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`complained of herein had an effect in this District, the alleged misstatements entered and the
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`subsequent damages occurred in this District, and the Company conducts business in New York
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`City.2
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`5.
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`In connection with the acts, conduct and other wrongs alleged in this complaint,
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`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
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`1 Parent is jointly controlled by CMSC Poultry, LLC (“CMSC”) and Wayne Farms Holdings LLC
`(“Holdings”). CMSC is owned and controlled by Cargill, Incorporated (“Cargill”). Holdings is
`majority-owned by Continental Grain Company (“CGC”).
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` For example, the Company reportedly participated in conferences in New York City in recent
`years.
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`2
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`including but not limited to, the United States mails, interstate telephone communications and the
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`facilities of the national securities exchange.
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`PARTIES
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`6.
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`Plaintiff is, and has been at all relevant times hereto, an owner of Sanderson
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`common stock.
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`7.
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`Defendant Sanderson is an integrated poultry processing company that produces,
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`processes, markets, and distributes fresh, frozen, and prepared chicken products in the United
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`States. The Company is incorporated in Mississippi. The Company’s common stock trades on the
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`NASDAQ under the ticker symbol, “SAFM.”
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`8.
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`9.
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`10.
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`11.
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`12.
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`Defendant Fred Banks, Jr. (“Banks”) is a director of the Company.
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`Defendant David Barksdale (“Barksdale”) is a director of the Company.
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`Defendant John Blerbusse (“Blerbusse”) is a director of the Company.
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`Defendant Lampkin Butts (“Butts”) is President and a director of the Company.
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`Defendant Mike Cockrell (“Cockrell”) is Treasurer, Chief Financial Officer, Chief
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`Legal Officer, and a director of the Company.
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`13.
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`14.
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`15.
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`16.
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`17.
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`18.
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`19.
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`Defendant Toni D. Cooley (“Cooley”) is a director of the Company.
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`Defendant Beverly Hogan (“Hogan”) is a director of the Company.
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`Defendant Edith Kelly-Green (“Kelly-Green”) is a director of the Company.
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`Defendant Phil K. Livingston (“Livingston”) is a director of the Company.
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`Defendant Suzanne Mestayer (“Mestayer”) is a director of the Company.
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`Defendant Sonia Perez (“Perez”) is a director of the Company.
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`Defendant Gall Jones Pittman (“Pittman”) is a director of the Company.
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`3
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`20.
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`Defendant Joe F. Sanderson, Jr. (“J. Sanderson”) is Chief Executive Officer and
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`Chairman of the Board of the Company.
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`21.
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`Defendants Banks, Barksdale, Blerbusse, Butts, Cockrell, Cooley, Hogan, Kelly-
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`Green, Livingston, Mestayer, Perez, Pittman, and J. Sanderson are collectively referred to herein
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`as the “Individual Defendants.”
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`22.
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`Defendants Sanderson and the Individual Defendants are collectively referred to
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`herein as the “Defendants.”
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`SUBSTANTIVE ALLEGATIONS
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`A. The Proposed Transaction
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`23.
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`On August 9, 2021, Sanderson, Cargill, and CGC announced that they had reached
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`a definitive agreement for a joint venture between Cargill and CGC to acquire Sanderson
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`for $203.00 per share in cash. The press release announcing the Proposed Transaction states, in
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`pertinent part:
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`Cargill and Continental Grain Company to Acquire Sanderson Farms for
`$203 per Share in Cash and Create a Leading U.S. Poultry Company
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`- All-cash transaction delivers significant and certain value to Sanderson Farms
`stockholders at a 30.3% premium to the June 18, 2021 unaffected share price, a
`22.8% premium to the 30-day VWAP as of June 18, 2021, and 15.2% premium to
`the all-time high share price as of June 18, 2021
`- Transaction brings together two complementary U.S. poultry operators, Wayne
`Farms and Sanderson Farms, under the joint ownership and control of two premier
`food and agribusiness companies with deep roots in U.S. agriculture
`- Wayne Farms CEO Clint Rivers to lead the combined business
`
`NEWS PROVIDED BY
`Cargill, Inc.
`Aug 09, 2021, 07:00 ET
`
`9,
`Miss., Aug.
`YORK and LAUREL,
`MINNEAPOLIS and NEW
`2021 /PRNewswire/ -- Cargill, Continental Grain Company, and Sanderson Farms,
`Inc. (NASDAQ: SAFM) announced today they have reached a definitive
`agreement for a joint venture between Cargill and Continental Grain to acquire
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`4
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`*
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`*
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`*
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`Sanderson Farms for $203 per share in cash, representing a total equity value for
`Sanderson Farms of $4.53 billion. The purchase price represents a 30.3% premium
`to Sanderson Farms' unaffected share price of $155.74 on June 18, 2021, the last
`full trading day prior to media speculation about the potential sale of Sanderson
`Farms; a 22.8% premium to the Sanderson Farms 30-day volume weighted average
`price ("VWAP") as of June 18, 2021, and a 15.2% premium to the all-time high
`share price as of June 18, 2021. Upon completion of the transaction, Cargill and
`Continental Grain will combine Sanderson Farms with Wayne Farms, a subsidiary
`of Continental Grain, to form a new, privately held poultry business.
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`
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`TRANSACTION DETAILS
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`The transaction is expected to close by the end of 2021 or early 2022, and will be
`subject to regulatory and Sanderson Farms stockholder approval, and other
`customary closing conditions.
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`The acquisition consortium has committed equity and debt financing in place to
`complete the transaction.
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`Wayne Farms CEO Clint Rivers will lead the combined company.
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`Upon the completion of the transaction, Sanderson Farms will become a private
`company, and its shares will no longer be traded on NASDAQ.
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`BofA Securities acted as the financial advisor to Cargill and Freshfields Bruckhaus
`Deringer (US) LLP acted as legal counsel. Gibson Dunn & Crutcher acted as tax
`counsel.
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`Centerview Partners LLC acted as financial advisor to Sanderson Farms and
`Wachtell Lipton Rosen & Katz and Fishman Haygood LLP acted as legal counsel.
`Lazard acted as the financial advisor for Wayne Farms and Continental Grain, and
`Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal counsel.
`
`About Sanderson Farms
`Sanderson Farms, Inc. is engaged in the production, processing, marketing and
`distribution of fresh, frozen and minimally prepared chicken. Its shares trade on the
`NASDAQ Global Select Market under the symbol SAFM.
`
`About Cargill
`Cargill's 155,000 employees across 70 countries work relentlessly to achieve our
`purpose of nourishing the world in a safe, responsible and sustainable way. Every
`day, we connect farmers with markets, customers with ingredients, and people and
`animals with the food they need to thrive. We combine 156 years of experience
`with new technologies and insights to serve as a trusted partner for food,
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`Case 1:21-cv-05329-FB-TAM Document 1 Filed 09/24/21 Page 6 of 14 PageID #: 6
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`agriculture, financial and industrial customers in more than 125 countries. Side-by-
`side, we are building a stronger, sustainable future for agriculture.
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`About Continental Grain Company
`Conti is a privately owned global investor, owner and operator of companies with
`more than 200 years of history across the food and agribusiness spectrum. It creates
`long–term value by applying deep industry knowledge, capital and talent to
`businesses ranging from established market leaders to promising innovators.
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`Conti builds platforms that leverage its strategic expertise in food production,
`processing, and distribution to source proprietary deals, working alongside trusted
`partners and supporting strong management teams. It brings a long–term ownership
`mindset, concentrating on investment and operating plans that create enduring
`value and a sustainable, efficient and nutritional food supply chain. Conti brings
`people, ideas and resources together to build the businesses that will feed the world.
`
`About Wayne Farms
`Wayne Farms LLC is a vertically integrated U.S. poultry producer. A subsidiary of
`Continental Grain Company, Wayne Farms owns and operates fresh and further-
`processed facilities throughout the Southeast, and employs more than 9,000
`individuals. Producing products under the brand names of WAYNE FARMS®
`fresh and prepared chicken; PLATINUM HARVEST® premium fresh chicken;
`CHEF'S CRAFT® gourmet chicken; NAKED TRUTH® premium chicken; and
`LADYBIRD™ premium chicken, Wayne Farms has a well-known history of
`operating humane, safe, industry-leading poultry processing facilities and
`delivering exceptional products to some of the largest industrial, institutional, and
`foodservice companies across the globe.
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`24.
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`On September 13, 2021, the Company filed a Schedule 14A Definitive Proxy
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`Statement under Section 14(a) of the Exchange Act (the “Proxy Statement”) with the SEC in
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`connection with the Proposed Transaction.
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`B. The Proxy Statement Contains Materially False and Misleading Statements and
`Omissions
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`25.
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`The Proxy Statement, which recommends that Sanderson shareholders vote in favor
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`of the Proposed Transaction, omits and/or misrepresents material information concerning: (i)
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`Sanderson’s financial projections; (ii) the financial analyses performed by Sanderson’s financial
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`advisor, Centerview Partners LLC (“Centerview”), in connection with its fairness opinion; and
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`(iii) potential conflicts of interest involving Centerview.
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`26.
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`The omission of the material information (referenced below) renders the following
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`sections of the Proxy Statement false and misleading, among others: (i) Reasons for the Merger;
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`Recommendation of the Board of Directors; (ii) Opinion of Centerview Partners LLC; and (iii)
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`Management Projections.
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`27.
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`Unless and until the material misstatements and omissions (referenced below) are
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`remedied before the October 21, 2021 shareholder vote on the Proposed Transaction, Sanderson
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`shareholders will be forced to make a voting decision on the Proposed Transaction without full
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`disclosure of all material information. In the event the Proposed Transaction is consummated,
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`Plaintiff may seek to recover damages resulting from Defendants’ misconduct.
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`1. Material Omissions Concerning Sanderson’s Financial Projections
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`28.
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`The Proxy Statement omits material information concerning Sanderson’s financial
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`projections.
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`29. With respect to the Management Projections, the Proxy Statement fails to disclose:
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`(1) all line items underlying (i) Net Sales, (ii) EBITDA, (iii) NOPAT, and (iv) Unlevered Free
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`Cash Flow; and (2) a reconciliation of all non-GAAP to GAAP metrics.
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`30.
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`The disclosure of this information is material because it would provide the
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`Company’s shareholders with a basis to project the future financial performance of the Company
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`and would allow shareholders to better understand the financial analyses performed by the
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`Company’s financial advisor in support of its fairness opinion. Shareholders cannot hope to
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`replicate management’s inside view of the future prospects of the Company. Without such
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`information, which is uniquely possessed by Defendant(s) and the Company’s financial advisor,
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`the Company’s shareholders are unable to determine how much weight, if any, to place on the
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`Company’s financial advisor’s fairness opinion in determining whether to vote for or against the
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`Proposed Transaction.
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`31. When a company discloses non-GAAP financial metrics in a Proxy Statement that
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`were relied upon by its board of directors in recommending that shareholders exercise their
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`corporate suffrage rights in a particular manner, the company must also disclose, pursuant to SEC
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`Regulation G, all projections and information necessary to make the non-GAAP metrics not
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`misleading, and must provide a reconciliation (by schedule or other clearly understandable
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`method) of the differences between the non-GAAP financial metrics disclosed or released with the
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`most comparable financial metrics calculated and presented in accordance with GAAP. 17 C.F.R.
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`§ 244.100.3
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`32.
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`The above-referenced omitted information, if disclosed, would significantly alter
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`the total mix of information available to the Company’s shareholders.
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`2. Material Omissions Concerning Centerview’s Analyses
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`33.
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`In connection with the Proposed Transaction, the Proxy Statement omits material
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`information concerning analyses performed by Centerview.
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`34.
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`The Proxy Statement fails to disclose the following concerning Centerview’s
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`“Selected Public Company Analysis”: (1) the individual metrics for the companies observed by
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`Centerview in its analysis; (2) the basis for applying a downward adjustment of 25% to the median
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`EV/EBITDA; (3) the Company’s net cash; and (4) the number of fully-diluted shares of Company
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`common stock outstanding.
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`35.
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`The Proxy Statement fails to disclose the following concerning Centerview’s
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`“Selected Precedent Transactions Analysis”: (1) the individual financial metrics of each company
`
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`3 See Mary Jo White, Keynote Address, International Corporate Governance Network Annual
`Conference: Focusing the Lens of Disclosure to Set the Path Forward on Board Diversity, Non-
`GAAP, and Sustainability (June 27, 2016), https://www.sec.gov/news/speech/chair-white-icgn-
`speech.html (footnotes omitted) (last visited Sept. 24, 2021).
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`Centerview observed in its analysis; (2) the closing date of each transaction; and (3) the value of
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`each transaction.
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`36.
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`The Proxy Statement fails to disclose the following concerning Centerview’s
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`“Discounted Cash Flow Analysis”: (1) the individual inputs and assumptions underlying the (i)
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`discount rates ranging from 7.5% to 8.5%, (ii) perpetuity growth rates of 1.0% to 2.0%, and (iii)
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`range of EBITDA multiples of 6.7x to 9.1x; (2) all line items underlying the unlevered free cash
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`flows of the Company over the period beginning August 1, 2021 and ending October 31, 2025; (3)
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`the terminal values of the Company; (4) the Company’s estimated net cash at July 31, 2021; and
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`(5) the number of shares of Sanderson common stock outstanding as of July 31, 2021.
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`37. With respect to Centerview’s “Analyst Price Target Analysis,” the Proxy Statement
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`fails to disclose: (1) the individual price targets observed by Centerview in its analysis; and (2) the
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`sources thereof.
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`38.
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`The valuation methods, underlying assumptions, and key inputs used by
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`Centerview in rendering its purported fairness opinion must be fairly disclosed to Sanderson
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`shareholders. The description of Centerview’s fairness opinion and analyses, however, fails to
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`include key inputs and assumptions underlying those analyses. Without the information described
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`above, Sanderson shareholders are unable to fully understand Centerview’s fairness opinion and
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`analyses, and are thus unable to determine how much weight, if any, to place on them in
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`determining whether to vote for or against the Proposed Transaction. This omitted information, if
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`disclosed, would significantly alter the total mix of information available to the Company’s
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`shareholders.
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`3. Material Omissions Concerning Potential Conflicts of Interest Involving
`Centerview
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`The Proxy Statement omits material information concerning potential conflicts of
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`39.
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`interest involving Centerview.
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`40.
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`The Proxy Statement fails to disclose the timing and nature of the past services
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`Centerview and/or its affiliates provided Sanderson and its affiliates, including the amount of
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`compensation Centerview received or expects to receive for providing each service.
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`41.
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`Disclosure of a financial advisor’s compensation and potential conflicts of interest
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`to shareholders is required due to their central role in the evaluation, exploration, selection, and
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`implementation of strategic alternatives and the rendering of any fairness opinions. Disclosure of
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`a financial advisor’s potential conflicts of interest may inform shareholders on how much weight
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`to place on that analysis.
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`42.
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`The omission of the above-referenced information renders the Proxy Statement
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`materially incomplete and misleading. This information, if disclosed, would significantly alter the
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`total mix of information available to the Company’s shareholders.
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`COUNT I
`For Violations of Section 14(a) and Rule 14a-9 Promulgated Thereunder
`Against All Defendants
`Plaintiff repeats and realleges each and every allegation contained above as if fully
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`43.
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`set forth herein.
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`44.
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`During the relevant period, Defendants, individually and in concert, directly or
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`indirectly, disseminated or approved the false and misleading Proxy Statement specified above,
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`which failed to disclose material facts necessary in order to make the statements made, in light of
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`the circumstances under which they were made, not misleading, in violation of Section 14(a) of
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`the Exchange Act and Rule 14a-9 promulgated thereunder by the SEC.
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`45.
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`Each of the Individual Defendants, by virtue of his/her positions within the
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`Company as officers and/or directors, were aware of the omitted information but failed to disclose
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`such information, in violation of Section 14(a) of the Exchange Act. Defendants, by use of the
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`mails and means and instrumentalities of interstate commerce, solicited and/or permitted the use
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`of their names to file and disseminate the Proxy Statement with respect to the Proposed
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`Transaction. The Defendants were, at minimum, negligent in filing the materially false and
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`misleading Proxy Statement.
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`46.
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`The false and misleading statements and omissions in the Proxy Statement are
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`material in that a reasonable shareholder would consider them important in deciding how to vote
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`on the Proposed Transaction.
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`47.
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`By reason of the foregoing, Defendants have violated Section 14(a) of the Exchange
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`Act and Rule 14a-9 promulgated thereunder.
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`48.
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`Because of the false and misleading statements and omissions in the Proxy
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`Statement, Plaintiff is threatened with irreparable harm.
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`COUNT II
`Violations of Section 20(a) of the Exchange Act
`Against the Individual Defendants
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`Plaintiff repeats and realleges each and every allegation contained in the foregoing
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`49.
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`paragraphs as if fully set forth herein.
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`50.
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`The Individual Defendants acted as control persons of the Company within the
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`meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their senior positions
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`as officers and/or directors of the Company and participation in and/or awareness of the
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`Company’s operations and/or intimate knowledge of the false statements contained in the Proxy
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`Statement filed with the SEC, they had the power to and did influence and control, directly or
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`indirectly, the decision-making of the Company, including the content and dissemination of the
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`false and misleading Proxy Statement.
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`51.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Proxy Statement and other statements alleged by Plaintiff to be misleading prior to
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`and/or shortly after these statements were issued and had the ability to prevent the issuance of the
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`statements or cause the statements to be corrected. As officers and/or directors of a publicly owned
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`company, the Individual Defendants had a duty to disseminate accurate and truthful information
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`with respect to the Proxy Statement, and to correct promptly any public statements issued by the
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`Company which were or had become materially false or misleading.
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`52.
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`In particular, each of the Individual Defendants had direct and supervisory
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`involvement in the operations of the Company, and, therefore, is presumed to have had the power
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`to control or influence the particular transactions giving rise to the securities violations as alleged
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`herein, and exercised the same. The Individual Defendants were provided with or had unlimited
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`access to copies of the Proxy Statement and had the ability to prevent the issuance of the statements
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`or to cause the statements to be corrected. The Proxy Statement at issue contains the
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`recommendation of the Individual Defendants to approve the Proposed Transaction. Thus, the
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`Individual Defendants were directly involved in the making of the Proxy Statement.
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`53.
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`In addition, as the Proxy Statement sets forth at length, and as described herein, the
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`Individual Defendants were involved in negotiating, reviewing, and approving the Proposed
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`Transaction. The Proxy Statement purports to describe the various issues and information that they
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`reviewed and considered—descriptions which had input from the Individual Defendants.
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`54.
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`By virtue of the foregoing, the Individual Defendants have violated Section 20(a)
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`of the Exchange Act.
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`55.
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`As set forth above, the Individual Defendants had the ability to exercise control
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`over and did control a person or persons who have each violated Section 14(a) and Rule 14a-9
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`promulgated thereunder, by their acts and omissions as alleged herein. By virtue of their positions
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`as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the
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`Exchange Act. As a direct and proximate result of Defendants’ conduct, the Company’s
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`shareholders will be irreparably harmed.
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff prays for judgment and relief as follows:
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`A.
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`Preliminarily and permanently enjoining Defendants and all persons acting in
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`concert with them from proceeding with, consummating, or closing the Proposed Transaction and
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`any vote on the Proposed Transaction, unless and until Defendants disclose and disseminate the
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`material information identified above to Company shareholders;
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`B.
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`In the event Defendants consummate the Proposed Transaction, rescinding it and
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`setting it aside or awarding rescissory damages;
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`C.
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`Declaring that Defendants violated Sections 14(a) and 20(a) of the Exchange Act,
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`and Rule 14a-9 promulgated thereunder;
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`D.
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`Awarding Plaintiff reasonable costs and expenses incurred in this action, including
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`counsel fees and expert fees; and
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`E.
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`Granting such other and further relief as the Court may deem just and proper.
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`JURY TRIAL DEMANDED
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`Plaintiff hereby demands a trial by jury.
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`Dated: September 24, 2021
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`
`
`
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` Respectfully submitted,
`
`
`
`
`
`HALPER SADEH LLP
`
`By: /s/ Daniel Sadeh
`Daniel Sadeh, Esq.
`Zachary Halper, Esq. (to be admitted pro hac
`vice)
`667 Madison Avenue, 5th Floor
`New York, NY 10065
`
`
`
`13
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`Case 1:21-cv-05329-FB-TAM Document 1 Filed 09/24/21 Page 14 of 14 PageID #: 14
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`Telephone: (212) 763-0060
`Facsimile: (646) 776-2600
`Email: sadeh@halpersadeh.com
` zhalper@halpersadeh.com
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`Counsel for Plaintiff
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