After Pre-Paid Legal Services, Inc. announced that its board agreed to a buyout of Pre-Paid Legal Services at $66.50 per share an investigation on behalf of investors of Pre-Paid Legal Services, Inc. (NYSE:PPD) questioning whether the proposed deal is unfair to PPD investors was announced.

The investigation by a law firm concerns whether Pre-Paid Legal Services, Inc. and certain of its officers and directors breach or breached their fiduciary duties owed to Pre-Paid Legal Services, Inc. (NYSE:PPD) investors in connection with the proposed takeover.

Last October Pre-Paid Legal Services, Inc. (NYSE: PPD) had announced that it is evaluating strategic alternatives, including a possible sale of Pre-Paid Legal Services and alternatives that do not involve a sale, to enhance shareholder value. Back in October the Pre-Paid Legal Services also said that the special committee has received an offer from a private equity firm to acquire all of the outstanding shares of Pre-Paid Legal Services common stock (PPD) in a merger at a price of $60.00 cash per share. Then on Monday, January 31, 2011, Pre-Paid Legal Services, Inc. (NYSE: PPD) announced that it entered into a merger agreement on January 30, 2011, with MidOcean PPL Holdings Corp. and PPL Acquisition Corp., both newly created entities formed by MidOcean Partners, a leading New York based private equity firm. Under the terms of the proposed agreement MidOcean Partners will acquire all of the outstanding shares of Pre-Paid Legal Services for a cash payment of $66.50 per PPD share, or approximately $650 million in the aggregate.

But the investigation by a law firm questions whether the sale process and the offered price are unfair to the shareholders of Pre-Paid Legal Services, Inc. (NYSE:PPD). While at first sight the offered price seems like an almost 10% premium to Pre-Paid Legal Services stock price the day before the announcement, but Pre-Paid Legal Services stock had a closing price as high as $65.77 on December 6, 2010 and traded as early as September 2010 as high as $67.67 per share. In addition PPD shares are currently trading below its 52weekHigh of $68.66 per share and $68.51 per share in July 2007. Furthermore Pre-Paid Legal Services performed well in the past for its shareholders. Pre Paid Legal Services reported between 2006 and 2009 relatively consistent 12months total revenues ranging from $444.02million to $464.49million. Its Net Income over the same time frame ranged between $51.20million to $60.17million. Pre-Paid Legal Services reported for the first three quarters 2010 a combined nine months Total Revenue of $342.42million with a combined nine months Net Income of $51.15million.
Therefore the investigation concerns whether the Pre-Paid Legal Services board of directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of Pre-Paid Legal Services, Inc. (NYSE:PPD) and breached their fiduciary duties to Pre-Paid Legal Services, Inc. (NYSE:PPD) shareholder by failing to adequately shop the Company before entering into the transaction. A potential class action lawsuit would seek to maximize the amount of money and information PPD shareholders would receive in a buyout, so the law firm.