Hastings Entertainment Merger With Investor on Hold2 Jun, 2014 By: Erik Gruenwedel
Hastings Entertainment June 2 said its planned merger with an investor has been put on hold after a district court issued a temporary restraining order on the deal.
Amarillo, Texas-based Hastings, which operates 126 stores selling and renting home entertainment, consumer electronics and related trend merchandise, earlier this year agreed to a $21.4 million merger with Draw Another Circle LLC, which is owned by Joel Weinshanker, who owns 12% of Hastings common stock.
The agreement, which would return Hastings to a privately-held company, was to be voted upon by shareholders June 12.
That vote is now on hold after two Hastings investors filed a lawsuit alleging, among other things, that the merger provides for insufficient consideration to be paid to Hastings shareholders in exchange for their shares of common stock.
The merger called for Hastings shareholders to receive $3 a share, which is just 3 cents a share above what the stock is currently trading at.
In addition, the suit contends that the officers (including CEO John Marmaduke) and directors of Hastings board breached their respective fiduciary duties in the course of negotiating and approving the merger agreement and that the other defendants aided and abetted such breach of fiduciary duties, according to a regulatory filing.
The U.S. District Court for the Northern District of Texas, Amarillo Division, has ordered a hearing on the matter.
Hastings Entertainment reported fourth-quarter (ended Jan. 31) net income of $2.3 million, up 91% from net income of $1.2 million during the previous-year period. Revenue declined $5.2 million to $136.4 million due in part to operating 10 fewer stores than a year ago.