Exhibit (i)(1)
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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LISA A. WEBER, :
:
Plaintiff, :
:
- against - : Index No. 03/602409
:
ENZIO BERMANI, PIERLUIGI BONAVITA, MARCO ISAIA, :
MARIO MAGENES, MARIA MARTELLINI, NICOLO NEFRI, :
STEFANO PODESTA, ROMITI MAURIZIO, GUIDO C. :
SCHIAVI, FILA HOLDING S.P.A., and RCS MEDIA GROUP :
S.P.A. :
:
Defendants. :
:
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CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph
1 hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the American Depository Shares
("ADSs") of Fila Holding, S.p.A. ("Fila" or the "Company"), since prior to the
wrongs herein complained of and continuously to date.
2. Fila is a designer and marketer of athletic and casual footwear
and of activewear, casualwear and sportswear for men, women and children. Fila
maintains offices at 8 West 40th Street, New York, New York. The Company's ADSs
are actively traded on the NYSE under the symbol "FLH."
3. Defendant RCS Media Croup S.p.A. ("RCS") owns or controls
approximately 91.09% of the equity of the Company. RCS has used its stock
ownership to appoint the entire Board of Directors of FILA.
4. Defendant Nicolo Nefri is Chairman of the Company, a Director of
RCS and Chairman of another subsidiary of RCS.
5. Defendant Pierluigi Bonavita is a director of Fila and the
officer responsible for Administrative and Financial Statements and Consolidated
Financial Statements of RCS.
6. Defendant Mario Magenes is a director of Fila and the officer
responsible for Tax Matters of RCS.
7. Defendant Maurizio Romiti is a director of Fila and a director,
the Chief Executive Officer and Managing Director of RCS.
8. Defendants Enzio Bermani, Marco lsaia, Maria Martellini, Stefano
Podesta and Guido C. Schiavi are Directors of the Company appointed by RCS.
9. RCS, as controlling shareholder, and the director Defendants
stand in a fiduciary position relative to the Company's public shareholders and
owe the public shareholders of Fila the highest duties of good faith, fair
dealing, due care, loyalty, and full and candid disclosure.
CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action as a class action, pursuant to
Article 9 of the of the New York Civil Practice Laws and Rules, on behalf of all
security holders of the Company (except the Defendants herein and any person,
firm, trust, corporation, or other entity related to or affiliated with any of
the Defendants) and their successors in interest, who are or will be threatened
with injury arising from Defendants' actions as more fully described herein.
11. This action is properly maintainable as a class action.
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12. The class is so numerous that joinder of all members is
impracticable. There are more 96 million Fila shares outstanding owned by
hundreds, if not thousands, of holders other than RCS and its affiliates.
13. There are questions of law and fact which are common to the
class including, inter alia, the following: (a) whether Defendants have breached
their fiduciary and other common law duties owed by them to Plaintiff and the
members of the class; (b) whether Defendants are pursuing a scheme and course of
business designed to eliminate the public securities holders of Fila in
violation of the laws of the State of New York in order to enrich RCS at the
expense and to the detriment of Plaintiff and the other public stockholders who
are members of the class; (c) whether the proposed transaction, hereinafter
described, constitutes a breach of the duty of fair dealing with respect to the
Plaintiff and the other members of the class; and (d) whether the class is
entitled to injunctive relief or damages as a result of the wrongful conduct
committed by Defendants.
14. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the Plaintiff are typical of the claims of other members of the class and
Plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class.
15. Defendants have acted in a manner which affects Plaintiff and
all members of the class alike, thereby making appropriate injunctive relief
and/or corresponding declaratory relief with respect to the class as a whole.
16. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class, which would establish incompatible standards
of conduct for Defendants, or adjudications with respect to individual members
of the Class which would, as a practical matter, be dispositive of the interests
of other members or substantially impair or impede their ability to protect
their interests.
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SUBSTANTIVE ALLEGATIONS
17. On June 10, 2003, RCS announced that it had made a proposal to
purchase all of the ADSs of the Company not held by RCS and its affiliates.
Under the proposed transaction, holders of the Company's ADSs would receive
$1.12 in cash for each Fila ADS. RCS has commenced a tender offer. The tender
offer expires on September 5, 2003.
18. On July 28, 2003, RCS filed with the SEC and mailed to Fila
shareholders its Tender Offer Statement on Schedule TO (the "SC-TO") in
connection with the proposed transaction. That same day, Fila filed with the SEC
and mailed to Fila shareholders its Solicitation/Recommendation Statement on
Schedule 14D-9 (the "14D-9"). The SC-TO and the 14D-9 contain information
purportedly describing, inter alia, the proposed acquisition, the opinion of
Fila's financial advisor and certain other purportedly relevant information.
19. The proposed acquisition of Fila by RCS, as described in the
SC-TO and the 14D-9 is both procedurally and substantively unfair. Among other
things, despite the fact that RCS controlled and dominated the Fila Board, no
special committee of independent directors was established to negotiate on
behalf of and to protect the interests of Fila's public shareholders.
20. Importantly, the SC-TO and the 14D-9 fail to disclose and/or
misrepresent material information necessary for Fila shareholders to make an
informed decision as to whether to tender their shares. Neither the SC-TO nor
the 14D-9 discloses the history of any negotiations that took place between the
Fila Board and RCS. Rather, it is apparent from the tender offer materials that
the Fila Board failed to protect the interests of Fila's public shareholders and
readily accepted RCS's initial lowball offer.
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21. The SC-TO and the 14D-9 also contain several other material
misstatements and omissions. The 14D-9 contains an Annex A which purportedly
contains a financial analysis of Fila's balance sheet that was undertaken on May
31, 2003 (the "May 31 analysis"). According to May 31 analysis, Fila's equity
was valued at $120 million. However, Annex A also includes a financial analysis
of Fila's balance sheet dated June 10, 2003 (the "June 10 analysis"). The June
10 analysis contains a number of dubious and unexplained adjustments to the May
31 analysis. According to this later financial analysis, Fila's equity was only
valued at $50 million. Neither the SC-TO nor the 14D-9 provides an adequate or
comprehensible explanation for the adjustments made to the June 10 analysis and
the enormous decrease in the equity value of Fila.
22. Moreover, the June 10 analysis, which contains a number of
dubious adjustments to the May 31 analysis, was used by Fila's financial advisor
UBS Corporate Finance Italia S.p.A. ("UBS") as a principal component to certain
of its valuation analyses and to opine as to the fairness of the transaction. In
particular, UBS incorporated the June 10 analysis into the Net Asset Value
("NAV") analysis it performed of Fila. Accordingly, the NAV analysis contained
in the 14D-9 is false and misleading and cannot be relied on by Fila's
shareholders.
23. Attached to the 14D-9 is a letter dated June 23, 2003, from UBS
to the Company's Board of Directors (the "fairness opinion") opining that the
proposed transaction is fair to Fila's public shareholders from a financial
point of view. The 14D-9 also provides a summary of the various financial
analyses performed by UBS. It is clear from these documents that UBS departed
from standard investment banking practices because it failed to perform typical
valuation analyses that are customary in these types of transactions. For
example, UBS failed to perform a "freeze-out analysis" of this transaction.
Premiums in a freeze out transaction such as this are typically 20-30% compared
with the less than 5% premium offered to Fila shareholders in this transaction.
UBS also failed to perform a comparable companies analysis or a comparable
transactions analysis which are usually included in the valuation analyses
performed by investment bankers in transactions of this type. Accordingly, Fila
shareholders cannot determine what the intrinsic value of the ADSs are and
whether the proposed buy-out is fair when put into the proper context.
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24. Fila has struggled in recent years and has accumulated hundreds
of millions of dollars in net operating loss carry forwards ("NOLs"). However,
in the valuation analyses performed by UBS no value was given to Fila's NOLs by
UBS in valuing the Company. Undoubtedly, these NOLs are quite valuable to the
Company. Accordingly, the fairness opinion is incomplete and cannot be relied
upon by Fila shareholders.
25. Furthermore, the 14D-9 discloses that the Company's and RCS's
Financial advisors received a fee of 2.65 million euros in connection with the
rendering of their opinion that this transaction was fair to Fila's shareholders
from a financial point of view. Considering that the total value of this
transaction is only $9,630,579 this fee is extraordinarily large and calls into
question the independence of the financial advisors and the integrity of the
fairness opinion.
26. The SC-TO and the 14D-9 contain material misleading statements
and omissions because they fail to disclose that Fila has a book value in excess
of $1.12 per share. Since the RCS offer is for $1.12 per ADS, this information
would be critical to a Fila shareholder's decision to tender his or her shares.
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27. The price of $1.12 per share to be paid to class members is
unfair and inadequate consideration because, among other things: (a) the
intrinsic value of the stock of Fila is materially in excess of $1.12 per share;
(b) the $1.12 per share price offers an inadequate premium to the public
stockholders of Fila; and (c) the $1.12 per share price is not the result of
arm's length negotiations but was fixed arbitrarily by RCS to "cap" the market
price of Fila stock, as part of a plan for RCS to obtain complete ownership of
Fila, its assets and businesses at the lowest possible price.
28. The offer is also highly coercive because RCS intends to delist
Fila after the tender offer closes, thus rendering any untendered Fila shares
virtually worthless.
29. The proposal is an attempt by RCS to unfairly aggrandize RCS at
the expense of the public holders of Fila's common stock. The proposal will, for
inadequate consideration, deny Plaintiff and the other members of the class
their right to share proportionately in the future success of Fila and its
valuable assets, and prospects, while permitting RCS to benefit wrongfully from
the transaction.
30. Given the RCS Defendants' stock ownership and representation on
Fila's Board and in management, they are able to dominate and control the other
directors, all of whom were hand-picked by the RCS Defendants and are beholden
to them for the prestige and perquisites of their offices. Under the
circumstances, none of the directors can be expected to protect the Company's
public shareholders in transactions which benefit RCS at the expense of Fila's
public shareholders, as exemplified by the proposed transaction.
31. Because of RCS's stock ownership, no third party, as a practical
matter, can attempt any competing bid for Fila's as the success of any such bid
would require the consent and cooperation of the RCS Defendants.
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30. Plaintiff and the other members of the Class will suffer
irreparable damage unless Defendants are enjoined from breaching their fiduciary
duties to Fila' public shareholders in a proposed transaction which will benefit
fiduciaries at the expense of the public shareholders of the Company.
31. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, Plaintiff demands judgment against Defendants, jointly
and severally, as follows:
(1) declaring this action to be a class action and certifying
Plaintiff as the Class representative and Plaintiff's counsel as Class counsel;
(2) enjoining, preliminarily and permanently, the transaction
complained of herein;
(3) to the extent, if any, that the transaction or transactions
complained of are consummated prior to the entry of this Court's final judgment,
rescinding sucks transaction or transactions, or granting the Class rescissory
damages;
(4) directing that Defendants account to Plaintiff and the other
members of the Class for all damages caused to them and account for all profits
and any special benefits obtained as a result of their unlawful conduct;
(5) awarding Plaintiff the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of Plaintiffs
attorneys and experts; and
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(6) Granting Plaintiff and the other members of the Class such other
and further relief as may be just and proper.
Dated: July 30, 2003
BERNSTEIN LIEBHARD & LIFSHITZ, LLP
/s/ U.S. Ottensoser
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U. Seth Ottensoser
Gregory M. Egleston
10 East 40th Street
New York, New York 10016
Tel: (212) 779-1414
Attorneys for Plaintiff
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