(Bloomberg) -- A Mexican investor lawsuit is putting the rights of minority shareholders to the test in a country where most publicly traded companies are tightly controlled by founding families.

A court this week temporarily suspended the securities regulator’s authorization for poultry processor Industrias Bachoco SAB to go private by buying up outstanding shares. The decision, outlined in documents seen by Bloomberg News, follows a request for an injunction that was filed by US fund VN Capital Management. 

The challenge gives minority shareholders a chance to argue that the price for the tender offer is unfairly low. Over the past few years, several prominent families have used tender offers to delist their companies from the stock market, where low trading volumes have been widely blamed for leaving many Mexican shares undervalued. 

A Mexico City federal judge ordered a “provisional suspension” of an authorization from the stocks regulator for the tender offer, and called a hearing for Sept. 28, the day before it’s set to close.  

Since the court’s order blocked the regulatory authorization of the tender offer, but not necessarily the offer itself, the practical effect of the ruling is unclear and will need to be resolved in the coming days, legal experts said. Even if Bachoco succeeds in completing the deal as expected, the challenge may give other companies pause when they decide to go private.

Unprecedented

Mauricio Basila, a lawyer in Mexico City who specializes in capital markets and formerly a top official at the regulator, said that while the suspension isn’t likely to last, it’s an unusual and important legal landmark in Mexico, where tender offers aren’t often challenged.

“There are not many precedents for this. It might be the only one,” said Basila, who is not involved in the case. “Even if it is not effective, now the precedent is there.”

The regulator did not respond to a request for comment.

Read More: Mexico Stock Market Is So Dead That Buyouts Are the Only Action

The challenge is a rare bid by a US investor to wade into Mexican courts, which have thwarted foreign investors in a series of rulings.

In the case of Bachoco, the controlling Robinson Bours family amassed 97.7% of shares through a first tender late last year and a subsequent series of block trades. Bachoco is offering 88.26 pesos per share in the tender to scoop up the remaining stake, with the board saying the proposed price meets Mexican legal requirements. 

Holdout shareholder VN Capital, which says it has around $100 million under management, holds 0.85% of Bachoco stock, worth around $25.4 million, according to Wednesday’s close. The poultry producer is a big enough part of their holdings that they’re fighting to get a higher price, on the basis that the offer was below comparable transactions, said James Vanasek, one of VN’s co-founders.

VN Capital Management was not the only fund to complain about the fairness of the original offer, but other holdouts ended up selling their shares in a series of block trades earlier this year.

Luis Cervantes, a lawyer representing Bachoco, said the suspension was “wrongly requested and it is wrongly granted.” The company said in a statement Wednesday it expects the offer to proceed as scheduled. 

©2023 Bloomberg L.P.