And it begins!
https://www.bizjournals.com/triangle/news/2018/12/18/shareholder-files-suit-over-ibm-red-hat-deal.html
Nearly two months after IBM announced plans to buy Raleigh-based Red Hat, at least one shareholder complaint over the deal has been filed in federal court.
Plaintiff Charles Orgel, on behalf of himself and “others similarly situated,” names Red Hat, as well as its CEO and board, as defendants in the 22-page lawsuit, filed Tuesday.
Red Hat, through a spokeswoman, declined to comment on the litigation.
Posed as a class-action complaint, the lawsuit alleges that Red Hat’s securities filings omit or “misrepresents” material deal information, such as the data used for the financial valuation analyses that support the opinions provided by its financial advisors.
The suit claims failure to “adequately disclose such material information” violates the Exchange Act.
“Red Hat stockholder(s) need such information in order to make a fully informed decision whether to vote in favor of the Proposed Transaction or seek appraisal,” the suit alleges.
The lawsuit also notes that Red Hat executives, many of whom – including CEO Jim Whitehurst – have already entered into retention agreements with IBM, “stand to reap substantial financial benefits for securing the deal with IBM.”
Read: Here's who benefits the most from IBM's $34B buy of Red Hat
Jim Verdonik, a Raleigh attorney with Ward & Smith who is not familiar with this particular complaint, says these kinds of suits “are about as common as flies on a dead horse” following acquisition announcements.
“I don’t know the merits of this case, but very few cases actually go to trial,” he says. “The name of the game is extracting settlement payments.”
Law firms sometimes recruit people to be lead plaintiffs in shareholder cases. A court has to approve the lead plaintiff and, whichever firm ends up representing him or her will get the biggest legal fees from the settlement.
And that means firms can compete to have their candidate selected.
“The odd thing about this particular lawsuit is that the initial reaction of most analysts was that IBM overpaid for Red Hat,” Verdonik says. “If so, difficult for [a] plaintiff to establish a case.”
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Red Hat's pending buyout by IBM is among the biggest in the history of the technology sector, a $34 billion transaction that values the company at $190 per share.
And that's right now.
A proxy statement filed this month leaves room for higher bidders, noting that other technology companies have expressed past interest in Red Hat – firms big enough to easily absorb the nearly $1 billion termination fee Red Hat might have to pay if the IBM deal falls through.
If all goes as planned, Red Hat could be an IBM subsidiary by late 2019.
Shareholders at Red Hat vote on the deal in January.
Red Hat shares closed flat Tuesday at $176. IBM closed at $116.65.