A Delaware judge slammed Barclays Capital for its role in the $4 billion buyout of Del Monte Foods, saying the investment bank acted improperly by playing both sides of the deal.
Delaware Chancery Court Vice Chancellor Travis Laster faulted Barclays even though it wasn’t a defendant in the shareholder suit over the KKR-led buyout of Del Monte.
Laster delayed a shareholder vote set for yesterday on the deal by 20 days and enjoined Del Monte and its private-equity buyers from enforcing the merger pact’s no-shop provision.
In his decision, Laster blasted Barclays for advising Del Monte on the sale while providing funding to buyers.
He also criticized the bank for advising one bidder, Vestar Capital Partners, to team with KKR on a joint offer — even though both firms had signed agreements that barred them from joining forces without the Del Monte’s prior approval.
Sell-side bankers are supposed to work for the board and run every decision by them.
“I think it is pretty bad,” a competing investment banker said. “The taint factor will be around them for a while.”
P.J. Moses was the Barclays sell-side banker advising Del Monte in its sale, while Barclays Vice Chairman Joe Gatto, a former Goldman Sachs consumer banking head, was also involved in the process, two sources close to the auction said.
Attorney Stuart Grant, who represented Del Monte shareholders objecting to the buyout, said Vestar’s role was key because Vestar’s partners — unlike most of the other private-equity firms in pursuit of Del Monte — have experience running similar food companies.
By putting Vestar in a bidding team with KKR and former Nabisco head James Kilts’ Centerview Partners, Grant argued, Barclays gave the consortium a considerable advantage.
Barclays said it “approached 53 potential buyers in an extensive, robust, and public sale that yielded no higher price” and that the $19 per-share price represented a 40 percent premium for Del Monte’s shares.