An investor in Allis-Chalmers Energy Inc. (NYSE:ALY) filed a lawsuit in State Court against members of the board of directors for allegedly selling Allis-Chalmers too cheaply too Seawell Ltd.
According to the complaint the plaintiff alleges that the defendants breached their fiduciary duty owed to the public shareholders of Allis-Chalmers Energy Inc. (NYSE:ALY) by attempting to sell Allis-Chalmers Energy through an unfair process at an unfair price.

Allis-Chalmers Energy Inc., located in Houston, Texas, provides services and equipment to oil and natural gas exploration and production companies throughout the Unites States, including Texas, Louisiana, Arkansas, Pennsylvania, Oklahoma, New Mexico, offshore in the Gulf of Mexico, and globally primarily in Argentina, Brazil, Bolivia and Mexico.

On Friday, August 13, 2010, Allis-Chalmers Energy Inc. (NYSE:ALY) and Seawell Limited (NOTC:SEAW) announced that a definitive merger agreement under which Seawell will acquire Allis-Chalmers in a transaction valued at approximately USD 890 million (including assumed debt). ALY stockholders will have the right to elect USD 4.25 in cash or 1.15 Seawell common shares SEAW for each share of Allis-Chalmers common stock (ALY) they hold, subject to proration if more than 35% of the shares elect to receive cash. According to Allis-Chalmers Energy Inc its Board of Directors has approved the merger agreement and the offer represents the implied acquisition price represents a 28% premium to Allis-Chalmers' six month average stock price based on the closing price of the Seawell common shares on the NOTC on August 12, 2010, and a 77% premium over Allis-Chalmers Energy Inc stock price on August 12, 2010.

But ALY shares traded as high as $3.92 per share as early as May 10, 2010, and as high as $4.20 per share as early as April 29, 2010. At least one analyst set a price target for Allis-Chalmers stock at $7.00 per share, and ALY shares are down from its52weekHigh of $4.94 per share, and traded during 2008 as high as $18.30 per share, and during 2007 as high as $26.67 per share. The plaintiff consequently alleges that “in 2008, Allis-Chalmers’ stock traded substantially above the price being offered in the proposed acquisition” and that defendants, via the proposed acquisition, have acted to cap the company’ stocks price and transfer the growth it is poised to make to Seawell. Furthermore, they have acted to ensure that potential competing bids for rhe company are stifled by improper defensive mechanisms, including a lack of a fiduciary-out provision in the merger agreement [..] and a voting agreement between Seawell and Lime Rock Partners V, L.P. [..], which owns approximately 39.4% of the outstanding Allis-Chalmers’ common stock, pursuant to which Lime Rock will vote against any other competing transaction”.