Argosy Gaming Company shareholder Judi Ann Ringhofer of Vernon Hills filed a class action suit against the company, its chairman and board members, claiming an announced merger with Penn National Gaming Co. does not adequately compensate shareholders given the company's "stellar third quarter 2004 financial results."
According to the suit filed Nov. 24 in Madison County Circuit Court, the defendants, which include chairman William F. Cellini, Richard J. Glasier, George L. Bristol, Jimmy F. Gallagher, James B. Perry, F. Lance Callis, John B. Pratt, Sr., Edward F. Brennan and Michael W. Scott, breached their fiduciary duty by not representing the full value of Argosy.
A recent financial report showed that Argosy's earnings had risen substantially over the previous year. Earnings per share were 71 cents, up from 56 cents last year. Argosy's net income also rose from $38.1 million during last year's third quarter report to $43.7 million in the same reporting period this year.
"Argosy shareholders will, if the transaction is cosummated, be deprived of the opportunity for substantial gains which the Company may realize," according to the suit.
According to the complaint, while the merger will be extremely beneficial for the shareholders of Penn, plaintiff and class members will be unable to reap the benefits of the merger since the companies are not merging, but rather Argosy is being sold for cash.
A recent report in the St. Louis Business Journal stated that Callis, one of the defendants and a Granite City lawyer, stands to collect nearly $41 million if he sells his 3 percent ownership of the company. The report notes that Callis holds 870,553 shares of Argosy stock, according to the company's proxy statement filed with the Securities and Exchange Commission in March
Ringhofer alleges the defendants did not seek and solicit the best possible offer available for Argosy’s shares. She alleges that at no time prior to the announcement of the merger did Argosy indicate that it was considering a sale or similar business combination.
Ringhofer also alleges that the merger is directly contrary to the business strategy announced to Argosy shareholders.
She claims that the defendants have thus far failed to announce any active auction or open bidding procedures best calculated to maximize shareholder value and have, instead, agreed to the merger which will only serve to inhibit the maximization of shareholder value.
In addition to the Alton Belle Casino, Argosy owns the Empress Casino in Joliet, and casinos in Mississippi, Louisiana, Iowa and Indiana.
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