Prestige Brand Holdings, Inc. ("Prestige" or the Company) describes itself as a seller of "well-recognized, brand name over-the-counter drug, household cleaning and personal care products."
The original Complaint charges Prestige, certain of its officers and directors, and other insiders with violations of the Securities Act of 1933. The Complaint also names as Defendants Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co and J.P. Morgan Securities Inc., the lead or co-lead underwriters of the IPO.
Specifically, the Complaint alleges that the prospectus filed with the Securities and Exchange Commission in connection with the initial public offering of Prestige common stock, which took place on or about February 9, 2005 (the "IPO"), was materially false and misleading. The prospectus, which forms part of the Registration Statement, became effective on or about February 9, 2005, and 32,200,000 shares of Prestige common stock were sold to the public, thereby raising approximately $515 million. Of the $515 million raised, approximately $67 million went to certain selling shareholders. Specifically, the Complaint alleges that the Prospectus was materially false and misleading because it failed to disclose and misrepresented the following adverse facts, among others: (a) that demand for the Company's products was declining and certain brands, including Compound W products were failing to maintain their market position and/or initial product sales levels; (b) that the Company was planning to withdrawal several products from the market, including Comet-brand housecleaning products that had proved unsuccessful, thus further eroding the Company's revenues and market share; and (c) as a result of the foregoing, Defendants' statements and opinions concerning the Company's sales, earnings, profitability and future prospects were lacking in reasonable basis.
The Complaint further alleges that on or around July 27, 2005, after the market close, Prestige announced its financial results for the quarter ended June 30, 2005. The Company reported that it experienced sales declines in each of its three business segments: OTC medicines, Household Cleaning products and Personal Care products. The Company also lowered its earning guidance for the remainder of fiscal 2005. In response to this announcement, the price of Prestige common stock declined to a low of $10.10 during trading on July 28, 2005, before closing for the day at $11.90 per share, a 40% one-day decline, on extremely heavy volume of more than 14 million shares. The July 28, 2005 closing price represented a 25% decline form the $16.00 per share offering price just five months before.
According to the Company’s FORM 10-K for the fiscal year ended March 31, 2007, the first of the six consolidated cases was filed on August 3, 2005. Plaintiffs purport to represent a class of stockholders of the Company who purchased shares between February 9, 2005 through November 15, 2005. Plaintiffs also name as Defendants the underwriters in the Company’s initial public offering and a private equity fund that was a selling stockholder in the offering. The District Court has appointed a lead Plaintiff. On December 23, 2005, the lead Plaintiff filed a Consolidated Class Action Complaint, which asserted claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934. The lead Plaintiff generally alleged that the Company issued a series of materially false and misleading statements in connection with its initial public offering and thereafter in regard to the following areas: the accounting issues described in the Company’s press release issued on or about November 15, 2005; and the alleged failure to disclose that demand for certain of the Company’s products was declining and that the Company was planning to withdraw several products from the market. Plaintiffs seek an unspecified amount of damages. The Company filed a motion to dismiss the Consolidated Class Action Complaint in February 2006. On July 10, 2006, the Court dismissed all claims against the Company and the individual Defendants arising under the Securities Exchange Act of 1934. The parties commenced the discovery process. On June 1, 2007, a hearing before the Court was held regarding Plaintiffs’ pending motion for class certification in the Consolidated Action, with no decision rendered.
On September 5, 2007, the Court issued the Order signed by U.S. District Judge Charles L. Brieant granting the motion to certify the class.
On July 28, 2009, a settlement agreement was made and entered into by and among the Settling Parties in the action.
On August 07, 2009, an order preliminarily approving settlement and proceeds was entered into the court docket.
On December 07, 2009, an order granting awarding attorneys’ fees and expenses was granted by the court. On the same day, an order approving plan of allocation of settlement proceeds and a final judgment and order of dismissal with prejudice were also granted by the court.
