A recent Law 360 story by Rose Krebs, “2 Firms Seek $3.75M For $17.5M Nutraceutical Suit Deal,” reports that Bernstein Litowitz Berger & Grossmann and Kessler Topaz Meltzer & Check are seeking a $3.75 million fee award for brokering a proposed $17.5 million deal to end a Delaware Chancery Court suit over Nutraceutical's $446 million sale to a private equity firm in 2017.

In a brief made public Monday, the two firms said the proposed settlement is "a significant achievement for the class and warrants approval."

Also, "the requested award is fair and reasonable in light of the benefits achieved, the stage of the litigation, and counsel's efforts," the firms said.

A stipulated settlement was submitted to the court in April proposing to end a proposed class action filed last year by investor Paul Eric Weiss against former Nutraceutical International Corp. directors and HGGC LLC, the private equity firm that acquired the nutritional supplement manufacturer.

Weiss asserted Nutraceutical was sold to the private equity firm in a deal that "cashed out public stockholders at an inadequate price" and was led by a board with "divided loyalties."

Weiss said the deal resulted from a "tainted sale process" fueled by the board's desire for the company to remain "in familial and familiar hands" following the retirement of former Nutraceutical CEO and Chairman Frank W. Gay II. Gay's brother, Robert C. Gay, is HGGC's co-founder and executive director, and the Gay brothers co-founded Nutraceutical in the 1990s, according to the suit.

"At a time when the company was executing well on its long-term business plan and not for sale, [Frank] Gay and the other directors agreed to a single-bidder sales process with HGGC. HGGC then leveraged its numerous connections with the company to secure exclusive negotiations and an unfair price for company stockholders," the suit argued. "The board's conduct was not intended to, nor did it, maximize stockholder value."

Weiss said the unfairness of the deal was apparent when California-based HGGC — which was co-founded by retired NFL quarterback Steve Young — "sold a 40% minority interest in the company to other private equity purchasers in a transaction that valued Nutraceutical at $650 million" within two years of the acquisition.

HGGC had long targeted Nutraceutical as a potential acquisition, over time leveraging its "myriad relationships with company insiders, including the three-member special committee formed to review and negotiate Nutraceutical's proposal, to ensure that it faced no competition and secured a friendly purchase price that did not reflect the company's true value," the suit claimed.

Weiss argued that when Frank Gay was approaching retirement after 25 years as Nutraceutical's CEO, the company was looking for "a familiar successor to take over the company," and turned to a former chief financial officer who had left the company to take a job at HGGC.

Instead of leaving HGGC, the potential successor suggested to Nutraceutical's board that the private equity firm could instead buy the company, the suit alleged.

Weiss accused the former Nutraceutical directors of running "an exclusive sales process that would inevitably result in one (and only one) successful bidder for the company — HGGC."

The suit also said certain unidentified managers of Nutraceutical provided some equity to help fund the deal, while some managers gained certain equity and employment benefits from the deal.

Weiss also claimed the Nutraceutical board secured stockholder support for the transaction after sending out a misleading and inadequate proxy.

Under the proposed settlement, which is set to be considered by the court at a hearing next week, a $17.5 million settlement fund will be set up for Nutraceutical's former public stockholders, excluding defendants and former company and HGGC officers, according to court filings.

In their brief, the two firms told the court the $17.5 million "settlement fund represents a 5.8% premium to the $41.80 per share merger consideration" and that "the per-share settlement fund is significant — particularly considering the risk that plaintiff could have prosecuted this action through trial without securing any recovery for the class."