Public shareholders in Gener8 Maritime are trying to block its pending acquisition by Brussels and New York-listed Euronav with a pair of class-action lawsuits filed in US federal court.

Among other charges, plaintiffs claim that the private equity and hedge funds making up a large chunk of Gener8’s ownership forced through an undervalued deal because it served their interests over those of the company and other shareholders.

Both complaints filed in US District Court for the Southern District of New York are asking judges to issue an injunction that would stop the $504m all-stock deal from going through until the allegations can be sorted.

The Gener8 lawsuits come as a judge in the same district has temporarily blocked another shipowner — Aegean Marine Petroleum — from its $367m acquisition of HEC Europe, based on a shareholder lawsuit.

Defendants in the Gener8 litigation, which include both companies and seven Gener8 directors, are accused of violating US securities laws by either omitting or misrepresenting information related to valuations, financial projections and the sales process.

Directors are also accused of breaching their fiduciary obligations to shareholders.

The two complaints are newly filed and there had been no responses lodged by defendants by the time TradeWinds went to press. However, the merger companies are expected to strongly contest the allegations.

A Gener8 official and a Euronav spokesman declined to comment this week.

The role of private equity in bringing about the combination of two of the world’s biggest crude-tanker companies is put under the miscroscope in the lawsuit filed by Joseph Fragapane of Quebec, Canada.

He charges that because members of Gener8’s “transaction committee” — the sub-panel of board members who essentially sought out and negotiated merger and acquisition options — were either currently or formerly employed by Gener8’s private equity owners, their actions were “extremely problematic” and “not disinterested”.

They included one former employee of a major shareholder — Ethan Auerbach of BlueMountain Capital Management — and two current employees of leading holders: Adam Pierce of Oaktree Capital Management and Steven D Smith of Aurora Management.

“The fact that so many members of the board were simply stand-ins for large private equity funds is problematic given the divergent nature of the interests of these funds and those of the public stockholders of Gener8 writ large,” Fragapane’s complaint argued.

Private equity’s increasing role in pushing for M&A as a way to exit their shipping investments, including in the Gener8-Euronav case, was highlighted in a 22 February article in TW+, TradeWinds’ quarterly magazine. Excerpts from that article are included in Fragapane’s complaint.

Another point of contention is the admission in the disclosure statement publicly filed by Euronav that Gener8’s committee had fielded a cash offer at a higher valuation than Euronav's bid from an unnamed Asian entity believed to be Chinese shipowner Cosco.

Gener8’s board explained in the disclosure statement that the committee was daunted by the various governmental regulatory hurdles that might have to be cleared both in Asia and the US.

However, Fragapane raises the question whether the board preferred an all-shares deal because a cash transaction would have locked in investment losses for the private equity firms.

Gener8 went public in 2015 at $14 per share but traded steadily downwards from the initial public offering and has been under $6 per share in recent weeks.

Fragapane is represented by Evan J Smith of New York law firm Brodsky & Smith.

The second complaint was filed by shareholder Tom Mohr, who is represented by Jonathan Lindenfeld of New York law firm Levi & Korsinsky.