WILMINGTON, Delaware A shareholder sued the board of corrugated packaging maker Temple-Inland Inc TIN.N to roll back the company's "poison pill" defense against a $3.3 billion hostile takeover bid by rival International Paper Co (IP.N).
The board of directors is accused of violating its duty to shareholders by refusing to negotiate with International Paper to improve its bid or to begin a sale process for the company, according to the complaint, which was filed on Friday in Delaware Chancery Court.
The lawsuit was filed by shareholder Tammy Raul, who in court papers accused the Temple-Inland board of seeking to entrench itself and to protect board members' "lucrative" pay.
Temple-Inland did not immediately return a call for comment.
Temple-Inland has recommended shareholders reject International Paper's bid because it undervalues the company.
If ultimately successful in the buyout, International Paper will be able to enhance its pricing power in a business with razor thin profit margins, allowing it extract higher returns for its own shareholders.
Temple-Inland adopted a poison pill in response to the hostile bid that would make it prohibitively expensive for International Paper to complete its offer.
International Paper said the company was aware of the lawsuit.
"The suit will take its own course. We are committed to seeing this offer through to completion and we believe we have very attractive offer on the table for both sets of shareowners," the company said in a statement.
The lawsuit follows a similar case against the board of Airgas Inc (ARG.N), which earlier this year used a poison pill defense to defeat a hostile bid by Air Products & Chemicals Inc (APD.N).
William Chandler, Delaware Chancery Court's chief judge, upheld Airgas's use of the poison pill, which is meant to give shareholders time to evaluate a bid for a company's shares.
Chandler retired in June and was replaced by Leo Strine as the court's top judge.
The case is Tammy Raul v. Doyle R Simons et al, Delaware Chancery Court, No. 6690. It has not yet been assigned to a judge.
(Reporting by Tom Hals; Editing by Tim Dobbyn)