A Gymboree investor filed a lawsuit in State Court against members of the board of directors alleging they breached their fiduciary duties by their attempt to sell the Gymboree Corporation too cheaply via an unfair process to Bain Capital Partners, LLC.
According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties owed to Gymboree stockholders by the attempt to sell The Gymboree Corporation to private equity buyer, Bain Capital Partners, LLC, through its affiliate Giraffe Holding, Inc. and its subsidiary Giraffe Acquisition Corporation.
On Monday, October 11, 2010 The Gymboree Corporation (Nasdaq: GYMB) and Bain Capital Partners, LLC announced that they have entered into an agreement under which affiliates of Bain Capital Partners, LLC will acquire all the outstanding stock of Gymboree for $65.40 per share, or $1.8 billion. Gymboree Corp said its board of directors unanimously agreement and the offer represents a 57.4% premium to its unaffected share price on September 30, 2010, before recent market rumors of a transaction, and a 23.5% premium to Gymboree's closing stock price on October 8, 2010, the last full trading day before today's announcement.

But the plaintiff alleges that the current offer undervalues Gymboree’s stock price. Shares of shares of the Gymboree Corporation (Public, NASDAQ:GYMB), which traded before the announcement at $52.95 per share, jumped in response to the buyout announcement to $69.18 on October 11 in pre-market or 30.65%, thus above the current offer. But GYMB shares traded since the announcement in open market at close to $65 per share. But the plaintiff says that while other clothing retailers have struggled, Gymboree, however, has continued to thrive and the company has beat Wall Street consensus, thus the offer should be higher.
The plaintiff also alleges the defendants breached their fiduciary duty by agreeing to deal protection provisions like a matching right provision, a top-up option and a hefty $30million termination fee, which even jumps to $50million of the superior offer does not occur during a forty day window.