The allegations in a recently filed Texas lawsuit against Pregis Performance Products LLC (Deerfield, IL) by Rex Performance Products (RPP; Marysville, MI) are meritless, and Pregis will vigorously defend itself, writes the company in a press release. The lawsuit in question alleges that Donald Tate, President and CEO of RPP, negotiated a secret side deal to drive down the purchase price of his own company in exchange for a so-called super bonus that would be paid by Pregis, as we reported on March 6.
Contrary to the allegations in the lawsuit, Pregis said that it purchased the operating assets of RPP at a fair price after extensive negotiations. “Pregis also acquired an experienced management team from RPP, and entered into customary employee retention agreements with that team to incentivize them to stay with Pregis after closing on a go-forward basis.”
Pregis stressed that it did not negotiate a so-called “super bonus” with Tate in exchange for a reduced asset purchase price, and that no court has issued any ruling on the merits of the lawsuit, which is at a preliminary stage. The customary employee retention payments at issue in the lawsuit only become payable if the former Rex management team stays with Pregis during the one-year period following closing.
RPP has acknowledged in a court filing that it was aware before closing that its former president and CEO intended to enter into an employee retention agreement with Pregis, but still decided to proceed with the closing on February 23, 2018, at the negotiated asset purchase price, according to Pregis.
The Texas lawsuit has been filed against Pregis, Olympus Partners and Manu Bettegowda, partner, as well as RPP’s former president and CEO.
“Pregis made the [RPP] acquisition to strengthen its position as a leading North American producer of engineered foam. We believed then, as we do now, that our combined product offering, enhanced foam technology and our teams’ knowledge strengthen our position as a valued partner to our customers,” said Kevin Baudhuin, President and CEO, Pregis.