Skechers Faces Legal Challenge Over $9.4B Buyout by 3G Capital

Skechers is facing legal scrutiny from a Florida pension fund over its $9.4 billion acquisition deal with private equity firm 3G Capital.

Skechers, a global footwear powerhouse, is set to be acquired for $9.4 billion by private equity firm 3G Capital. The deal has generated significant buzz, especially after a legal challenge from the Key West Police Officers & Firefighters Retirement Plan, a Florida-based pension fund and Skechers shareholder, who filed suit in late May to halt the buyout.

Shareholder Concerns: Fairness and Transparency

In its legal complaint filed in Los Angeles Federal Court, the pension plan raised “red flags,” alleging that founder Robert Greenberg and his family, who hold approximately 60% of Skechers’ voting power, “controlled the sales process to a single bidder and deprived the minority stockholders of any legitimate bidding process.” The fund pointed to Skechers’ “longstanding relationship” with 3G Capital, arguing that the process lacked a competitive auction and may not have yielded the best possible outcome for other investors.

The fund pushed for additional disclosures before closing, urging that “full and timely disclosures are crucial for shareholders to determine if the terms are fair.” The deal offers shareholders the choice between $63 per share in cash or $57 per share plus a unit in the new, private company.

Judge’s Decision: Legal and Financial Perspectives

Judge Percy Anderson, as highlighted in Bloomberg Law, declined to issue an injunction. The court found that the pension plan “failed to provide concrete examples of information that would be important in deciding which option to choose.” Judge Anderson explained there’s no shareholder voting in this scenario because “the merger was approved due to Greenberg’s majority ownership status.”

Anderson wrote:

“This is not a scenario where the Court would be left to ‘unscramble the eggs’ if preliminary injunctive relief were withheld and plaintiff were to ultimately prevail on the merits of its claim.”

He added that, even if the pension plan proved a lack of disclosure, monetary damages could provide an adequate remedy. The SEC is still reviewing the deal and may request further disclosures.

Financial Details and The Road Ahead

As the transaction awaits SEC review, no official closing date has been set. To finance the buyout, Skechers recently priced $6 billion in debt, underlining the massive scale of this go-private move. For now, ordinary investors can track corporate updates and watch for any further regulatory developments.

Takeaways: Implications for Investors

This high-stakes legal contest highlights the power of majority shareholders in public companies and the limited influence of minority investors when it comes to mergers and acquisitions. Financial remedies often replace blocking such deals, even when disclosure and procedural fairness are hotly debated.