UPDATE 1-U.S. judge hits RBC with $76 mln in damages tied to Rural/Metro deal

Fri Oct 10, 2014 8:54pm EDT
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(Adds RBC spokesman, shareholder attorney comments)

By Tom Hals

Oct 10 (Reuters) - A Delaware judge said Royal Bank of Canada must pay $75.8 million in damages to former shareholders of Rural/Metro because it failed to disclose conflicts of interest that tainted the $438 million buyout of the ambulance operator.

The ruling is the latest in recent years in which Wall Street bankers have been hit with judgments or had to pay millions of dollars in settlements due to undisclosed conflicts in mergers and acquisitions.

"We are reviewing the decision and are considering our options. The process is ongoing so we cannot comment further," Kevin Foster, an RBC spokesman said.

Delaware Court of Chancery Vice Chancellor Travis Laster found that the value of Rural/Metro shares were $21.42 at the time of the sale, above the $17.25 per share paid by private equity firm Warburg Pincus. The difference was $4.17 per share, which was the damage to shareholders, Laster determined in his 95-page opinion published on Friday.

Laster reduced the damage award by 17 percent to account for settlements worth $11.6 million that shareholders reached with directors and Moelis & Co, which advised the company on its sale.

Earlier this year Laster found that bankers at RBC Capital Markets were so eager to collect higher fees that they convinced Rural/Metro directors to sell the company in June 2011 at an unreasonably low price.

The former shareholders had sought about $172 million from Toronto-based RBC, according to published reports.   Continued...