An investor in Rural/Metro Corporation (NASDAQ:RURL) filed a lawsuit in State Court in effort to stop the takeover of Rural/Metro Corp. by Warburg Pincus. According to the complaint the plaintiff alleges that members of the board of directors of Rural/Metro Corporation breached their fiduciary duties in connection with proposed takeover.

On Monday, March 28, 2011, Rural/Metro Corporation (NASDAQ: RURL) announced it has entered into an agreement for the acquisition of Rural/Metro Corp. by the private equity firm Warburg Pincus in an all-cash transaction. Under terms of the agreement, Rural/Metro shareholders will receive $17.25 per share of common stock in cash. Rural/Metro Corporation said the offer represents a 37% premium over the closing price on March 25, 2011 and a 28% premium over the volume weighted average share price over the previous month.

Indeed, in response to the takeover news shares of Rural/Metro Corporation (NASDAQ:RURL) increased from $12.72 per share on Friday, March 25, 2011 to $17.17 on Monday.

However, the plaintiff claims the price is inadequate and the process fundamentally unfair. The per share consideration offered in the proposed acquisition is unfair and grossly inadequate because, among other things, the intrinsic value of Rural/Metro Corp common stock is materially in excess of the amount offered given the company’s recent financial performance. In fact Rural/Metro Corp. has performed well for its shareholder in the past years. Rural/Metro Corp. reported an increase in its 12months Total Revenue. Its 12months Total Revenue increased from $446.06million reported on June 30, 2007 to $530.75million reported on June 30, 2010. Rural/Metro was able to pull out of s Net Loss of $1.01million reported on June 30, 2007 and report a Net Income of $3.51million on June 30, 2010.

Further the offer represents a mere 8.8% premium to Rural/Metro’s Corp.’s 52 week high prior to the announcement of the deal which occurred just 6 weeks prior to the announcement, so the plaintiff. In addition analysts have set a price target as high as $18.00 per share for Rural/Metro stock.

Furthermore the plaintiff alleges that the merger agreement contains certain onerous and preclusive deal protection devices, such as a no solicitation and a $16.92million termination fee provision, that operate conjunctively to make the proposed acquisition a fait accompli and ensure that no competing offers will emerge for the Rural/Metro Corp.