Toledo's Dana Corp., the subject of a hostile takeover attempt, yesterday accused an investment banking firm of using its confidential information to help the unwanted suitor it is now advising.
In its first proactive move since ArvinMeritor Inc. began its unsolicited takeover bid for Toledo's largest corporation, Dana filed a lawsuit in U.S. District Court in New York against New York's UBS Securities LLC, which Dana hired early last year to help with a “two-party corporate transaction” it is pursuing, and Swiss parent company UBS AG.
UBS Securities is one of Dana's lenders too, and receives confidential information in both capacities, according to the lawsuit. It said Dana has furnished substantial amounts of confidential information about the company to UBS, including data about “its financial condition, its business plan and prospects, its competitive posture, its trade secrets, and its potential liabilities.”
UBS Securities failed to give the Toledo Fortune 500 firm timely notice that it was acting as financial adviser to ArvinMeritor, of Troy, Mich., for its hostile takeover effort, according to the lawsuit. UBS has been ArvinMeritor's adviser since at least April and received confidential financial information from Dana on May 29, it said.
“UBS undertook to assist ArvinMeritor in its hostile takeover effort without any disclosure to Dana and without Dana's knowledge or consent,” the suit says. “Rather, UBS acted secretly.”
A UBS spokesman denied there was any conflict of interest. ArvinMeritor, a smaller auto parts maker than Dan, has said it will pay UBS Securities up to $16 million, including nearly $10 million if the Dana acquisition is completed.
“UBS is committed to the highest standards of professionalism and ethics and has procedures in place to prevent any breaches of client confidentiality,” UBS spokesman Kris Kagel said. “The firm has no material, non-public information about Dana.”
A spokesman for Dana said the company declined further comment.
Besides damages to be determined at trial, Dana is seeking an injunction to prevent UBS from continuing to represent ArvinMeritor in the takeover attempt, from providing the rival parts maker with information, and from helping the company get financing.
Dana also wants UBS to return all information it received from Dana, disclose who received it, and repay its fees, according to the lawsuit.
ArvinMeritor commenced a $15-a-share tender offer to Dana shareholders on July 9. The offer expires at 5 p.m. Aug. 28, although ArvinMeritor has said it could be extended. The takeover would involve $2.2 billion in stock purchased, plus debt restructuring and other expenses, making the hostile bid worth $4.4 billion.
The UBS Securities managing director working with Dana called the company after ArvinMeritor's intentions were announced July 8 and said he had been aware a co-worker was working with the Michigan competitor.
He said he regretted the relationship put him in an “awkward position” and UBS would withdraw from its contract with Dana, according to the lawsuit.
Dana is seeking a court order showing the company has no obligations to UBS.
Bloomberg News Service contributed to this report.