EasyLink Services International Corp., a provider of cloud-based business messaging and transaction services, was sued by a shareholder claiming Open Text Corp.’s $310 million takeover offer undervalues the company.
EasyLink shareholder Yechiel E. Gross sued the Norcross, Georgia-based company and executives, arguing that the proposed transaction shortchanges investors and is the result of a “flawed process,” according to a complaint filed yesterday in Chancery Court in Wilmington, Delaware. Gross seeks to represent shareholders as a group.
EasyLink executives “did not take all steps necessary to obtain a full, fair and adequate price for EasyLink’s shares,” lawyers for Gross said in court filings. The deal doesn’t account for “the intrinsic value” of EasyLink’s stock which, due to the company’s growth prospects is “materially in excess of the amount offered.”
Open Text, the world’s largest independent provider of enterprise content management software, offered to buy EasyLink for $7.25 a share, according to a May 1 statement announcing the buyout, issued just minutes after the close of the day’s trading session.
The Waterloo, Ontario-based company’s offer represents a 14 percent premium to the EasyLink’s May 1 close of $6.36, and is 23 percent more than the April 30 closing share price of $5.90.
EasyLink fell a half-cent to $7.15 at 3:04 p.m. New York time in Nasdaq Stock Market trading today. Open Text fell cents, or 1 percent, to $49.99 in Nasdaq trading.
“Obviously we believe the suits are without merit and we intend to vigorously defend ourselves,” said Glen Shipley, EasyLink’s chief financial officer, in a telephone interview today.
Gross argues that management negotiated a deal that unfairly favors Open Text and will “unreasonably dissuade potential suitors from making competing offers.” Under the terms of the proposed transaction EasyLink is restricted from seeking other offers and would have to pay a $9.4 million break-up fee if the deal is terminated, according to court documents.
“The proposed transaction lacks any of the fundamental hallmarks of fairness,” Gross’s lawyers contend.
The case is Gross v. EasyLink Services International Corp., CA7505, Delaware Chancery Court (Wilmington).