A California company is suing investment bank Goldman Sachs and a managing director, alleging that it was cut out of the deal to buy Raytheon Aircraft Co. in 2007.
Paragon & Co. and its owner, Charles Lubash, based in Woodland Hills, Calif., allege the company was key to the purchase and was promised payment or an equity share in what became Hawker Beechcraft Corp. But that didn't happen, according to a lawsuit.
The suit, filed in U.S. District Court of California, Western Division, alleges that Paragon worked with Goldman on the deal. Raytheon Co. sold Raytheon Aircraft Co. to a Goldman subsidiary and Canadian investment firm Onex Corp. in 2007 for $3.3 billion.
Lubash and Paragon, which develops and aids in the development of aerospace companies, seek $300 million in compensation.
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In their response to the suit, Goldman and managing director Sanjeev Mehra deny the allegations and that Paragon had any causal effect on the ultimate transaction and said "no compensation is owing."
A Goldman Sachs spokeswoman said the company does not comment on legal matters as a matter of policy.
Lubash and attorneys for Paragon and Goldman Sachs did not return calls for comment.
The lawsuit originally was filed in November 2007.
Last month, attorneys for Goldman and Mehra filed a subpoena for documents from Wichita aviation consultant Cecil Miller, who turned them over Monday. Miller was part of a group that formed with Paragon in 2002 to pursue the purchase, he said.
"The group got that whole thing moving," he said.
He and Lubash worked closely with Mehra, Miller said.
"Then we got left out in the cold," Miller said.
According to the lawsuit, the following is how the deal went down:
Paragon began talking with Jim Schuster, Raytheon Aircraft's CEO at the time, in late 2002 about the possibility of buying the Beech product line. Paragon then became interested in buying the entire company and began talking with Raytheon Co.
At the time, Paragon was told the aircraft company wasn't for sale but that it would review offers.
Paragon hired investment bank Rodman & Renshaw to develop a plan for the takeover, according to the suit. It received interest from six prospective investors, provided they secured a lead funding bank.
That's when Paragon and Rodman officials met with Mehra and presented the plan for buying the planemaker, according to the suit.
In 2004, Mehra told Lubash that Goldman was interested in being the sole funding bank and asked Lubash to terminate talks with the other potential investors.
Mehra, Lubash and the others involved with Paragon met with Raytheon from 2003 until December 2006 about the purchase. Lubash conducted most of the discussions with Raytheon and reported results to Mehra and Goldman Sachs, according to the suit.
Paragon "kept in regular contact with Raytheon on behalf of (Paragon, Lubash), Goldman and Mehra, working to convince Raytheon that (they) are serious and credible potential buyers," court documents said. Mehra contacted Lubash to get updates and status reports.
By August 2006, Raytheon brought in Credit Suisse Securities to become involved in the sale's process, according to the suit.
Credit Suisse sent Mehra a letter inviting Goldman to submit its candidacy as a potential buyer.
Mehra forwarded the letter to Paragon.
"At all times... defendants requested that plaintiffs use their influence and efforts, especially during the bidding process, to secure the purchase of RAC on behalf of both plaintiffs and defendants," the lawsuit said.
Goldman Sachs asked Paragon to help in the analysis and pricing of the company.
In October 2006, a bidders meeting was held in Wichita between Raytheon, Credit Suisse and three potential buyers, including Goldman Sachs and its "new partner funding bank for the RAC purchase, Onex Partners of Canada."
In late 2006, Raytheon agreed to sell Raytheon Aircraft to GS Capital Partners, a Goldman subsidiary, and Onex. The deal closed in March 2007.