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Boston College Law School

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Tuesday, November 17, 2009

3Com-HP Lawsuit

You know what they say ... it's not a real deal unless there's a lawsuit.  Well, the 3Com/HP deal has its first lawsuit.  The $2.7 billion all cash deal was announced last week.  Here's the merger agreement.  Given that it's an all cash deal, the complaint alleges that the board failed to meet its fiduciary duties by not getting the highest price reasonably available to shareholders when it agreed to sell the company to HP.  That's a Revlon complaint.  I used to think that meant something, but following Lyondell, I now know that unless there's a claim of fraud or misrepresentation, short of an "utter failure" by the board to attempt to meet its duties, this kind of complaint is going nowhere.  Since the only question is price, then it appears the only available remedy for those who think the company got sold for less than its fair value is appraisal under Sec 262 of the DGCL.

Here's the appraisal language from the merger agreement (Section 2.7(c)): 

(c) Statutory Rights of Appraisal.

 
(i) Notwithstanding anything to the contrary set forth in this Agreement, all shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and held by Company Stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have properly and validly perfected their statutory rights of appraisal in respect of such shares of Company Common Stock in accordance with Section 262 of the DGCL (collectively, “Dissenting Company Shares”) shall not be converted into, or represent the right to receive, the Per Share Price pursuant to Section 2.7(a). Such Company Stockholders shall be entitled to receive payment of the consideration that is deemed to be due for such Dissenting Company Shares in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Company Shares held by Company Stockholders who shall have failed to perfect or who shall have effectively withdrawn or lost their rights to appraisal of such Dissenting Company Shares under such Section 262 of the DGCL shall no longer be considered to be Dissenting Shares and shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Price, without interest thereon, upon surrender of the certificate or certificates that formerly evidenced such shares of Company Common Stock in the manner provided in Section 2.8.
 
(ii) The Company shall give Parent (A) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments received by the Company in respect of Dissenting Company Shares and (B) the opportunity to control all negotiations and proceedings with respect to demands for appraisal in respect of Dissenting Company Shares. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal, or settle or offer to settle any such demands for payment, in respect of Dissenting Company Shares.
I wonder if this lawsuit even has a nuisance value.

-bjmq

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