In duelling press releases released Friday, both companies announced that they had come to a settlement.Getty Images/iStockphoto
Two companies embroiled earlier this week in a legal spat over the use of confidential information in a takeover bid have settled out of court.
Late last week, alternative lender IOU Financial filed a lawsuit in the Quebec Superior Court against Qwave Capital LLC to stop the Atlanta-based venture capital firm from using confidential information in its hostile partial takeover bid for 55 per cent of the Montreal-based company, launched in late June.
In duelling press releases released Friday, both companies announced that they had come to a settlement. Under the terms of the settlement, IOU Financial will drop its legal case and implement its shareholder rights plan – effectively buying the board more time to seek "alternative transactions" – up until Sept. 23, 2015, after which it will drop it. In exchange, Qwave will not take up and pay for any IOU shares until that same date. After that, however, it is fair game.
"Considering IOU's engagement to pursue an alternative transaction, the settlement agreement with Qwave … provides the board with a longer time frame to complete its process," Evan Price, chairman of the board of directors of IOU, said in a press release.
From its own release, Qwave manager Serguei Kouzmine said the settlement "prevents any further delays in completing the Qwave offer stemming from IOU's litigation, provides certainty around the timing for tendering to the offer, and avoids the potential for costly and unnecessary litigation."
In November, both companies signed a non-disclosure agreement, or NDA – often signed to see if a mutual business combination can be formed – under which private information was exchanged. IOU Financial, an S&P/TSX Venture-listed company with a market value of $25-million, sought to stop any use of private information for hostile purposes and to suspend the bid. An NDA prevents potential suitors from going hostile or launching proxy battles and usually lasts for 12 or 18 months.
A successful legal challenge for a breach of an NDA could have potentially terminated the bid entirely.