MacFadyen: Lawyer Up
The class-action law firms are enjoying a renaissance as public companies go private.
May 27, 2009
As of late last week, nine taking-private acquisitions had been sealed this year, according to data from Thomson Reuters. Of those, my own digging quickly identified that eight of those deals attracted ensuing class action lawsuits.
Even Milberg Weiss, which saw four of its partners (including Melvyn Weiss) plead guilty to federal charges, is still out there actively pointing fingers, doing their best impression of Paul Blart, mall cop.
Milberg Weiss’s handywork includes wresting a settlement out of Freescale Semiconductor, claiming that the board breached their fiduciary duty by agreeing to a $17.6 billion sale. It should be noted that Carlyle Group, an investor in that deal, has written down its commitment by 85%, according to Reuters.
And for some reason it’s difficult to attract qualified boardmembers.
Among the most active class-action law firms today are Brodsky & Smith, Levi & Korinsky, and Bull & Lifshitz. Brodksy & Smith has popularized the “investigative” press release, which ostensibly is the precursor to an ensuing lawsuit. When NetApp agreed to acquire Data Domain on May 20, Brodsky & Smith waited a mere day before they announced their investigation, which they’re pursuing “on behalf of shareholders of Data Domain.”
From the press release, the law firm hypothesized: “The transaction appears to be unfair, in part, given that Data Domain stock was trading at $24.82 a share as recently as June 25, 2008 and the merger agreement represents a negligible premium.”
NetApp, as it turns out, agreed to pay $25 a share, which represented a 40% premium to Data Domain’s stock price immediately ahead of the deal.
I’ll be interested to see what Brodsky & Smith turns up. It’s possible that through their investigative efforts, they’ll uncover a global economic meltdown. Of course it’s just conjecture on my part, but if I had to offer my own guess, I’d speculate that that might have had something to do with NetApp’s apparent “negligible premium.”
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