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Paragon Commercial Misleading Merger Proxy Omits Info Securities Class Action

On April 27, 2017, Paragon Commercial Corporation announced a proposed transaction under which it would be acquired by TowneBank. But the complaint for this class action claims that the Proxy Statement filed with the Securities and Exchange Commission (SEC) on October 26, 2017 omits enough material information to make it false and misleading and to prevent shareholders from properly evaluating the transaction.

The class for this action is all public shareholders of Paragon Commercial Corporation.

Paragon is a holding company, the parent company of Paragon Bank, which “provides a private banking experience to businesses, professional, executives, entrepreneurs, and other individuals.” The North Carolina Bank’s important features include highly responsive professionals, a courier service, and free worldwide ATM access.

In the proposed transaction, Paragon shareholders would receive 1.720 of Towne common stock for each share of Paragon that they own, but the complaint asserts that the Proxy doesn’t contain enough information to properly evaluate this exchange.

What does the complaint claim has been left out of the Proxy?

First, it claims that the Proxy omits information needed to evaluate Paragon’s and Towne’s financial projections and the analyses performed by Paragon’s financial advisor Raymond James & Associates. For example, it claims that the Proxy omits projections for Paragon for years 2020 through 2022, as well as projected free cash flows and the associated line items.

The complaint alleges that the missing information makes the Proxy false and misleading, particularly the sections Background of the Merger, Paragon’s Reasons for the Merger, Recommendation of Paragon’s Board of Directors, Certain Unaudited Prospective Financial Information, and Opinion of Paragon’s Financial Advisor.

Second, the complaint claims that the Proxy doesn’t provide a full background of the process of the transaction, including whether the six financial institutions who expressed an interest in Paragon submitted indications of interest or proposals for mergers and reasons the board decided not to pursue any of the potential transactions.

Third, the complaint alleges that the Proxy does not disclose whether financial Raymond James has conflicts of interest, for example, what previous services Raymond James provided to Paragon or Towne and how much of its fee is contingent on the completion of the merger.

With so much information missing, the complaint contends, the company has violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and shareholders for Paragon cannot gain a full understanding of the transaction until all the missing information is supplied. 

Article Type: Lawsuit
Topic: Securities

Most Recent Case Event

Paragon Commercial Misleading Merger Proxy Omits Info Securities Complaint

November 30, 2017

On April 27, 2017, Paragon Commercial Corporation announced a proposed transaction under which it would be acquired by TowneBank, with Paragon shareholders receiving 1.720 of Towne common stock for each share of Paragon that they own. But the complaint for this class action claims that the Proxy Statement filed with the Securities and Exchange Commission (SEC) on October 26, 2017 omits enough material information to make it false and misleading under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934. 

paragon_commercial_sec_compl.pdf

Case Event History

Paragon Commercial Misleading Merger Proxy Omits Info Securities Complaint

November 30, 2017

On April 27, 2017, Paragon Commercial Corporation announced a proposed transaction under which it would be acquired by TowneBank, with Paragon shareholders receiving 1.720 of Towne common stock for each share of Paragon that they own. But the complaint for this class action claims that the Proxy Statement filed with the Securities and Exchange Commission (SEC) on October 26, 2017 omits enough material information to make it false and misleading under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934. 

paragon_commercial_sec_compl.pdf
Tags: Mergers or Acquisitions, Providing False or Misleading Information, Proxy Statement, Securities