Barclays is bracing for a lawsuit from shareholders of the food giant Del Monte, after a US judge ruled that the bank "secretly and selfishly manipulated" the sale of the company in order to jack up its own fees.
Del Monte's board agreed last year to a $4bn takeover bid from private equity groups led by KKR, but a shareholder vote to approve the deal, which was supposed to take place yesterday, had to be adjourned amid controversy.
Barclays' investment banking arm, Barclays Capital, acted on both sides of the transaction, as adviser to the Del Monte board and as a financier for KKR.
A Delaware judge strongly criticised Barclays' conduct after hearing evidence for a lawsuit filed against Del Monte by shareholders who believed that their company is being sold off too cheaply. Lawyers for the plaintiffs said that Barclays will now be added as a defendant in the lawsuit, accused of aiding and abetting Del Monte directors in a breach of their duty to shareholders.
The ruling, by vice-chancellor Travis Laster, made for damning reading. Barclays, he said, organised the "surreptitious and unauthorised pairing" of KKR and another private equity firm, Vestar, who ended up working together on the Del Monte together instead of bidding against each other. Del Monte's board was kept in the dark about Barclays' role, he said.
And because Barclays stands to make $24m in fees for providing loans to finance the KKR-Vestar bid, the board should never have put it in charge of soliciting alternative bidders. "Barclays secretly and selfishly manipulated the sale process to engineer a transaction that would permit Barclays to obtain lucrative buy-side financing fees," Mr Laster said, and the bank "had a keen desire to see the deal close with KKR".
Barclays said last night it was "proud" of its work for Del Monte and that its addition to the shareholder lawsuit would at least give it the chance to present its side of the story in court.