Another investor in J. Crew Group, Inc. (NYSE:JCG) filed a lawsuit in effort to stop the takeover of J. Crew Group by TPG Capital L.P. and Leonard Green & Partners, L.P. The lawsuit alleges, among other things, that the defendants violated Section 14(a) of the Securities Exchange Act of 1934 and corresponding Rule 14a-9.
According to the complaint the plaintiff alleges that the defendants have issued materially false or misleading statements regarding the proposed acquisition. On Nov. 23, 2010 J.Crew Group, Inc. (NYSE: JCG) announced that it has entered into an agreement to be acquired by funds affiliated with TPG Capital and Leonard Green & Partners, L.P. Under the terms of the agreement, holders of the outstanding common shares of J.Crew (JCG) will receive $43.50 per share in cash, or a total of approximately $3.0 billion. J Crew said the price represents a premium of 29% to J.Crew's average closing share price over the last month
According to the complaint the offer by TPG Capital and Leonard Green & Partners, L.P materially undervalues J. Crew Group, Inc. and is unfair to stockholders.

Shortly thereafter the first investor filed a lawsuit against J. Crew officers and directors, including Chief Executive Officer Millard Drexler alleging breaches of fiduciary duties arising out of their attempt to sell J. Crew too cheaply via an unfair and self-serving process to TPG Capital and Leonard Green & Partners LP. The plaintiff alleged that the offer is a mere 15.5% premium and materially undervalues the company. The open market sent shares of J. Crew Group, Inc. (NYSE: JCG), which traded the trading day before the buyout news at $37.75 per share, in response to the announcement already above the current offer to over $44 per share. In addition at least one analyst has set a price target for J. Crew stock at $50 per share and JCG shares traded as recently as June over $44.50 per share, in May as high as $48.63 per share, and in April as high as $50 per share.

In addition the plaintiff claims that the proposed acquisition is designed to unlawfully divest J. Crew’s public stockholders of the future growth potential of the company. J. Crew Group’s 52week Total Revenue went from $1.152billion to $1.578billion reported within the past four filing periods. Its Net Income over the same time frame went from $77.78million to $123.36million.

Further the plaintiff claims that certain of the defendants stand on both sides of the transaction, are engaging in self-dealing , and are obtaining for themselves personal benefits, including personal financial benefits not shared equally by the plaintiff and other JCG investors. The plaintiff alleges that J. Crew CEO Drexler joined J. Crew in 2003, at which time it was private and TPG Capital owned a majority of J.Crew and now when it came time to sell J.Crew, Drexler returned to his former employers. In addition CEO Drexler, who put $10 million of his own money into the company in 2003, is with about 3.45 million shares, or 5.4 percent of J. Crew currently the largest individual shareholder and now stands to profit about $150 million or about 15 times his original investment in the $3billion takeover. The plaintiff claims that CEO Drexler even would receive over $300million since he owns over 7.5million shares, restricted shares, and exercisable or soon to be exercisable options to purchase the company stock.