A class-action lawsuit was filed against IF Bancorp Inc. (IROQ) and its successor, ServBanc Holdco Inc., alleging the board misled shareholders with a "false and misleading" proxy statement for its recent merger, which resulted in a lower-than-promised payout of at least $1.51 per share.
The lawsuit, filed by Pomerantz LLP in the Northern District of Illinois, claims violations of the Securities Exchange Act. "As a result of Defendants' wrongful acts and omissions, Plaintiff and other Class members were deprived of their right to be presented with accurate proxy materials," the complaint states.
The proxy, filed on Dec. 30, 2025, stated shareholders would receive approximately $27.20 per share. However, the final cash consideration was $26.40 per share. The difference stems from an undisclosed requirement for IF Bancorp to establish a $7 million reserve against a loan, which lowered the company's tangible common equity below a key threshold and eliminated a "Special Dividend" that shareholders were led to expect. A contingent payment of $1.51 per share may be distributed, but the lawsuit notes "there is no guarantee" it will be paid.
The suit argues the alleged misrepresentations caused shareholders to vote in favor of the merger and to not exercise their appraisal rights, ultimately causing them to sell their shares for less than fair value. Investors who purchased IF Bancorp securities have until June 29, 2026, to seek appointment as lead plaintiff.
The Merger's Math Problem
The core of the lawsuit focuses on the difference between the promised and actual merger payout. The deal's terms included an "Equity Based Adjustment," which would reduce the $27.20 per-share price if IF Bancorp's tangible common equity fell below a $77.8 million threshold at closing.
According to the complaint, the proxy statement failed to disclose that a mandatory loan renewal for Iroquois Federal, IF Bancorp's subsidiary, would require it to establish a $7 million cash reserve. This action, announced just two days before the merger closed, pushed the company's equity below the threshold, reducing the payout to $26.40 per share.
What's Next
The creation of a $5,004,650 "Contingent Payment Fund," which could potentially pay shareholders the missing $1.51 per share, is a central issue. The lawsuit highlights that the fund would only be disbursed if the loan is repaid, and any undisbursed funds would revert to ServBanc Holdco, not the former IF Bancorp shareholders. The legal proceedings will now focus on the lead plaintiff deadline of June 29, 2026, as the case moves forward.
This article is for informational purposes only and does not constitute investment advice.
