TPG files suit against Israel's Strauss in Dutch court

Reuters

By Tova Cohen

TEL AVIV, Nov 26 (Reuters) - Private equity firm TPG has asked a specialised Dutch court to order an inquiryinto the affairs of Strauss Coffee, in which it holds a 25percent stake, claiming majority owner Strauss Group had abused its rights in the company.

The move comes after TPG had been looking to sell the stake,for which it paid $293 million in 2008.

TPG has the right to trigger an initial public shareoffering in Strauss Coffee and last week Israeli financialnewspaper TheMarker reported the company was being lined up fora listing on the New York Stock Exchange.

However, that IPO process has now been disrupted by adispute between the two investors, brought to a head by what TPGsaid was Strauss Group's proposed dismissal of Strauss CoffeeChief Executive Todd Morgan.

In its filing with the Dutch Enterprise Chamber, which hearscorporate governance disputes, TPG is seeking an injunctionagainst Morgan's dismissal and the appointment of an independentdirector to Strauss Coffee's board, TPG said on Tuesday.

Strauss Coffee is a Dutch-registered company.

Israel-based Strauss Group said it had not yet received theclaim. "Once it is received, the company will study the claimand vigorously defend against it," Strauss said in an emailedstatement.

"Strauss Group is committed to support Strauss Coffee and toachieving the best outcome for all stakeholders of the company,"it said. It made no further comment and did not refer to Morgan.

TPG said its claim was based on what it called the abuse byStrauss Group of its majority shareholder rights, saying thegroup had overcharged Strauss Coffee for "non-existent and/orinsufficient services" by many millions of euros.

Sources familiar with the matter said TPG believed StraussGroup was overcharging by 6 million euros a year in areas suchmarketing, human resources, legal and information technology.

TPG also cited the proposed dismissal of Morgan, despite hisbeing credited with leading an increase in the turnover andprofitability of the company. Morgan was TPG's boardrepresentative to Strauss Coffee before he became CEO three anda half years ago.

"Strauss Group is seeking to dismiss Mr. Morgan after he hadmentioned the issues of overcharging ... to Strauss Coffee'sboard of directors and sought independent advice," TPG said. Thesources said Morgan had hired a Dutch law firm to look into thematter.

In July, Strauss said it and TPG were examining options forthe sale of TPG's stake in Strauss Coffee after TPG held thestake for five years.

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