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3M, Cogent Sued by Investor Who Claims $943 Million Buyout Is Undervalued
3M Co. was sued by a Cogent Inc. investor who claims a $943 million buyout of the fingerprint- identification systems maker doesn’t provide enough for his shares.
Officials of St. Paul, Minnesota-based 3M and Cogent structured the $10.50-a-share offer in a way that bars other bidders from making an offer for the security company, Cogent shareholder Bryce Bell contends in his Delaware Chancery Court lawsuit.
“No rival bidder is likely to emerge and act as a stalking-horse because the merger agreement unfairly assures that any auction will favor 3M,” Bell’s lawyers said in the complaint, filed today. Both 3M and Cogent are named as defendants in the suit.
The suit comes as three of Cogent’s largest investors, including Iridian Asset Management LLC, the fourth-largest investor as of June 30, said today they considered 3M’s offer too low to accept.
Chris Danne, a Cogent spokesman, didn’t immediately return a call for comment on the suit today. 3M officials said they’d defend themselves in court against the allegations.
“We believe the lawsuit is without merit,” said Donna Fleming Runyon, a 3M spokeswoman.
3M agreed Aug. 30 to buy Pasadena, California-based Cogent for an 18 percent premium to the share price on Aug. 27, the last day of trading before the announcement.
Comparing Prints
That’s lower than the 29 percent average premium offered to U.S. identification-systems companies in more than 20 acquisitions announced during the past five years, according to data compiled by Bloomberg.
Cogent makes fingerprint and palm-print identification systems that allow customers to electronically capture print images, encode prints into files and compare them to a database containing potentially millions of prints.
Demand for the company’s technology generated $25.4 million in revenue in the second quarter and had analysts bullish about the company’s prospects, Bell’s lawyers said in the suit.
“Given the company’s recent performance and future prospects, the consideration shareholders are to receive is inadequate,” according to the suit.
3M and Cogent officials also have built unfair provisions in the buyout deal to bar the door to other bids, Bell’s lawyers added.
The deal includes an excessive $28.3 million termination fee and a “no solicitation” provision that prevents Cogent executives from shopping the company around, according to the suit.
The “pretty high” fee “may also discourage other bidders,” Josephine Millward, an analyst with Benchmark Co., said today in an e-mail.
The case is Bryce B. Bell v. Ming Hsieh, 5784, Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.
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