Leading online travel company defrauded investment group, intentionally concealing material information, in connection with $550 million acquisition of an industry competitor
CHICAGO, May 31, 2017 – Travel website Priceline.com may have pioneered the “name your own price” model for booking travel, but its parent company, The Priceline Group (NASDAQ: PCLN), took the tagline too literally in defrauding an investor of millions of dollars in connection with a 2017 acquisition, according to a lawsuit filed today in Connecticut. Priceline is a leader in the online travel industry, whose holdings include priceline.com, KAYAK and Open Table, among others.
Twelve hours after Tersly Investments Ltd. and Highlander Worldwide Ltd. inked a settlement to end a long-running dispute, Priceline announced that it had acquired Highlander-owned Momondo Group for $550 million. The settlement between Tersly and Highland, however, included a release of future investment claims, and stripped Tersly of valuable investment rights. Had Tersly been aware of the pending transaction, it would not have agreed to these terms, as the acquisition by Priceline would have entitled it to substantial compensation. The day after Tersly signed the agreement, Priceline issued a press release and filed SEC documents announcing its planned acquisition of Momondo/Cheapflights.
“This is fraud in its absolute purest form,” said Adam Levitt, Tersly’s legal counsel and a partner of DiCello Levitt, who has represented private equity firms, hedge funds, and other investors in litigation against several of the nation’s most powerful corporate entities. “Priceline knew or should have known about Highlander’s involvement with Tersly through standard due diligence, including that Tersly had investment rights in any sale of Momondo/Cheapflights.”
Levitt continued: “Rather than disclosing the pending transaction to Tersly, Priceline knowingly conspired with Highlander to negotiate a bad-faith settlement that terminated Tersly’s future investment rights – which would have been substantial, given Priceline’s position in the travel industry. Such a settlement was a small price for Highlander to pay to clear the way for a $550 million sale.”
The fraudulently induced release was part of a settlement agreement regarding a years-long contractual dispute between Highlander and Tersly, during which Highlander consistently denied Tersly compensation it had earned from a prior sale of some (but not all) Momondo/Cheapflights shares. In late 2016, however, Highlander suddenly, and without explanation, changed its position and agreed to Tersly’s contract claim, only if Tersly released its future rights. Unbeknownst to Tersly, the impetus for Highlander’s conciliatory position was that it had already agreed to sell its remaining Momondo/Cheapflights shares to Priceline, triggering additional substantial compensation obligations to Tersly.
“Given the timing of Priceline’s announcement of the planned acquisition – the very morning after Tersly signed the settlement agreement – there should be no doubt that the transaction had been in the works for many months, if not longer,” Levitt said. “Priceline and Highlander concealed the information and coerced Tersly to sign away its rights under a false premise because they were strongly motivated to avoid their obligations to my client.”
Tersly was one of the original owners of Cheapflights. Its founder’s shares entitled it to special privileges, including voting rights that conferred effective control of Momondo/Cheapflights to Tersly. In 2002, Tersly and Highlander entered into an agreement by which Tersly sold its Momondo/Cheapflights founder’s shares to Highlander, with the stipulation that Tersly was entitled to both initial cash considerations, and a continuing interest that would entitle it to deferred consideration in the form of a mandatory distribution to Tersly in conjunction with the sale of any Momondo/Cheapflights shares, without limitation and extending to Priceline’s acquisition of the remaining shares in the transaction in question.
The complaint, which is available upon request, claims compensatory damages, disgorgement of unjustly retained benefits, punitive damages, exemplary damages, attorneys’ fees, interest, and other costs. The case is Tersly Investments Limited v. The Priceline Group Inc., filed in Connecticut Superior Court.
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