A Delaware court has granted class certification in a significant class action lawsuit filed by investors challenging the $7.3 billion go-private sale of Inovalon Holdings to Nordic Capital. The case, brought by the City of Sarasota Firefighters’ Pension Fund, Steamfitters Local 449 Pension Fund, and Steamfitters Local 449 Retirement Security Fund, alleges that Inovalon failed to adequately disclose that investors paid $400 million in fees to financial advisers ahead of the transaction.
In a Monday order, Chancellor Kathaleen St. Jude McCormick approved the plaintiffs’ stipulation and certified the class of Inovalon common stockholders. The lawsuit claims that Inovalon, its CEO Kenneth R. Dunleavy, and the company’s independent special committee approved a $41-per-share merger—down from an initial $44-per-share offer—without proper disclosure, while advisers allegedly had conflicts of interest.
The suit stems from the August 2021 announcement of the Nordic Capital transaction. Founded in 1998, Inovalon develops healthcare data tools designed to reduce costs and went public in 2015, raising approximately $600 million through an IPO.
Investors contend that private interests of Nordic Capital, Insight Partners, and 22C Capital secured terms allowing Dunleavy and controlling investor Andre Hoffmann to roll over $1.3 billion of their shares—tax-free—into the merged business, to the detriment of common stockholders. Public stockholders, however, were not afforded a similar opportunity. The lawsuit also highlights potential conflicts involving advisers such as J.P. Morgan Securities LLC and Evercore Group LLC.
After initially dismissing the investors’ claims in July 2023, the Delaware Supreme Court reversed the decision in May 2024, ruling that minority investors may not have been adequately informed and that alleged conflicts of interest required further examination. Chancellor McCormick subsequently sent the case into discovery, finding it “reasonably conceivable” that the defendants acted in bad faith and that proxy statements failed to fully disclose conflicts and fees.
“The court’s certification of the class marks a critical step forward for Inovalon stockholders seeking accountability in this $7.3B Nordic deal,” said the plaintiffs’ counsel.
