This is a securities fraud class action lawsuit against United Rentals, Inc., certain of its officers and directors, and Cerberus.
On July 23, 2007 United Rentals announced that it had entered into a definitive merger agreement (the "Merger Agreement") under which affiliates of Cerberus Capital Management, L.P. ("Cerberus") would acquire all of the outstanding shares of United Rentals common stock for $34.50 per share (the "Merger"). On September 19, 2007, United Rentals filed its Schedule 14A Proxy Statement (the "Proxy") with the Securities and Exchange Commission ('SEC') in anticipation of the shareholder vote to approve the Merger. On October 19, 2007, United Rentals announced that its stockholders approved the Merger Agreement.
On November 14, 2007, United Rentals publicly announced that Cerberus had informed United Rentals that Cerberus was not prepared to proceed with the purchase of United Rentals on the terms set forth in the Merger Agreement. On the news that Cerberus was backing out of the Merger, United Rentals posted its biggest drop since it went public in 1997 and plunged 31%, or $10.51, from $34.01 per share to a closing price of $23.50 per share.
The class action complaint alleges that the defendants violated the federal securities laws by failing to disclose that, several weeks after the Merger Agreement was signed, Cerberus contacted United Rentals management and expressed its concern about its ability to proceed with the Merger given the changes in the credit and financial markets, on which its financing for the deal depended. It was not until November 14, 2007, when United Rentals filed a Form 8-K that included letters, dated August 31, 2007 and September 6, 2007 which demonstrated that the Merger had been at risk since August 29, 2007, and that Cerberus sought to renegotiate the terms of the Merger Agreement.
Defendants' failure to disclose this information materially mislead investors and caused the market for United Rentals' shares to trade at prices artificially inflated by the belief that the Merger would proceed. Had the August correspondence between Ceberus and United Rentals been disclosed to the public in the Proxy, United Rentals' shareholders would have been alerted to the risk of the transaction not going forward.
Name (Stock Symbol)
United Rentals, Inc. (URI)
United Rentals, Inc., through its subsidiaries, operates as a rental equipment company in the United States, Canada, and Mexico.
Cerberus Capital Management, L.P
Cerberus Capital Management, L.P., along with its affiliates, is a large private equity firm.
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