Shareholders sue to block Stamford-based Cara Therapeutics’ proposed merger with Houston biopharma firm
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Cara Therapeutics is based at 400 Atlantic St. in Stamford.
Two shareholders have filed separate lawsuits in New York seeking to block the proposed merger of Stamford-based Cara Therapeutics Inc. with Houston-based Tvardi Therapeutics Inc.
Cara and Tvardi announced the plan to merge in a joint news release issued Dec. 18, stating that the deal would be an all-stock transaction, and that the merger was expected to result in the ouster of Cara’s top three executives.
Cara stockholders are scheduled to vote on the deal April 1.
The lawsuits were filed in the Supreme Court of the State of New York by shareholders Joseph Clark and Michael Kent. The lawsuits were filed on behalf of each shareholder by the same attorney, Richard A. Acocelli of Acocelli Law, based in Southampton, New York.
The lawsuits state that the New York court has jurisdiction in the case because Cara’s common stock shares trade on the Nasdaq Capital Market, which is based in the state.
Both lawsuits claim that Cara filed a “materially incomplete and misleading Prospectus” related to the merger deal with the Securities and Exchange Commission (SEC), including that the prospectus omits “material information regarding the financial projections for Tvardi.”
“Absent disclosure of the foregoing material information prior to the Stockholder Vote, Plaintiff will be unable to make an informed decision regarding the Share Issuance and the Proposed Transaction, and is thus threatened with irreparable harm, warranting the injunctive relief sought,” the lawsuit states.
On March 24, Cara filed a response to the lawsuit with the SEC stating that it is releasing additional information. The biopharmaceutical firm said that in addition to the two lawsuits, it also received 13 demands for additional information about the merger deal.
In the filing, Cara acknowledges the claims that it is accused of making “materially false and misleading statements, “ but denies that it has “violated any laws or breached any duties to stockholders of Cara,” and believes that it is not required to provide supplemental disclosures “under any applicable law, rule or regulation.”
“Nevertheless,” the filing continues, “solely to eliminate the burden and expense of litigation and to avoid any possible disruption to the merger that could result from such litigation,” it is providing supplemental disclosures.
Among the additional or updated information provided in the SEC filing is that the combined company is “expected to initially have a seven-member board of directors,” composed of five members designated by Tvardi, one designated by Cara, and one vacancy that could be filled by Tvardi. It adds that if the vacancy isn’t filled once the merger is completed, the board may decide to eliminate that seat.
Cara’s filing of supplemental information also states that, once the merger is closed, Sujal Shah, Tvardi’s chairman, will serve as chairman of Cara, while Imran Alibhai, CEO of Tvardi, will serve as the CEO of Cara.
The companies have previously said Cara’s top three executives — CEO and President Christopher Posner, CFO Ryan Maynard and General Counsel Scott Terrillion — are each “expected to cease to be the officers of the company.”
In addition, existing members of Cara’s board of directors who do not remain with the combined company are expected to tender their resignations from the board.
Founded in 2004 in Tarrytown, New York, Cara relocated to Connecticut in 2007 with $4 million in financial assistance from Connecticut Innovations, the state’s venture capital arm. The company relocated to Shelton before moving to Stamford in 2015.
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