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Published On: April 6, 2014Categories: Securities and Investor

Court Approves Derivative Action and Shareholder Class Action Settlement

We previously reported on this lawsuit when we filed it. Last Friday, Judge Marc Greenberg of the Dallas County Court of Law No. 5 today entered final judgment approving the derivative settlement between PMC Commercial Trust and its largest shareholder group, Hoak & Co. The Dallas based shareholder derivative action concerned a reverse merger between PMC Commercial Trust, a Dallas-based Real Estate Investment Trust, or a REIT, and California-based CIM Urban REIT LLC. REIT derivative actions are rare, and even more rarely successful, according to FORBES Magazine, because of the permissive rules that apply to REIT management. Here, the derivative challenged the merger which provided for less than $9.00 in compensation for PMC’s existing shareholders where PMC’s book value was estimated at $12 to $13 per share.

The Settlement provided that if the merger were to be passed by PMCs shareholders, they would receive the promised $5.50 in cash per share, and in addition, be able to sell their shares at up to $5 to CIM’s managing entity. This had the effect of creating a market for PMCs shares post-merger of over $4.60–a $1.70 per share improvement for PMC’s shareholders.

“This is a manifestly fair settlement,”  lead counsel for the shareholders, Mazin A. Sbaiti of Steckler LLP in Dallas told the Court. “Shareholders were primarily worried about the value of their post-merger diluted shares, and this settlement provided them and the market with the necessary certainty and actual, tangible value,” he further explains.

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