BroadSoft Shareholder Compensation and Merger Proxy Securities Class Action

In the press release announcing BroadSoft’s proposed merger with Cisco Systems, BroadSoft president and CEO said, “We are excited about this transaction, which represents the culmination of a robust process undertaken by BroadSoft’s Board of Directors to maximize shareholder value.” But for whose shareholders? According to the complaint for this class action, the $55 per share offered to BroadSoft’s shareholders is too low, and the Proxy Statement omits material information that does not allow them to properly evaluate the deal.

The class for this action is all holders of BroadSoft common stock who are being or will be harmed by BroadSoft’s actions.

BroadSoft provides software and services that help telecommunications companies offer hosted, cloud-based unified communications to businesses. Cisco provides products, services, and integrated solutions for networks and has operations around the globe.

The complaint points out that in the year prior to the merger announcement, BroadSoft’s stock price rose by roughly 70%, from $31.77 to $53.90; in August of 2017, the company reported promising projects and positive second-quarter financial results; and it repeated its positive results in its third-quarter reports as well, with total revenue on the rise.

The complaint also claims that analysts believe that the merger consideration is too low, with one company foreseeing a $60 to $70 per share offer prior to the merger announcement.  Even the financial advisors for the deal, Qatalyst Partners and Jefferies, calculated higher implied equity values per share. So how did the company arrive at the deal price?

According to the complaint, the Proxy statement filed with the Securities and Exchange Commission (SEC) on November 13, 2017 is incomplete, in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and does not contain enough information for shareholders to answer that question. The complaint claims that the Proxy is misleading in three respects:

  1. First, the complaint alleges that a number of key components for the analyses are missing, along with other figures, calling into question the Proxy’s Discounted Cash Flow Analyses and Premia Paid Analysis.
  2. Second, the complaint claims that the Proxy discloses that certain officers and directors of BroadSoft will continue with the merged company, but it does not disclose full details of the negotiations, including the timing of the talks. This information is required by the law, the complaint claims, and is necessary for shareholders to understand any conflicts of interest the officers and directors may have.
  3. Third, the complaint alleges that the Proxy does not disclose whether the confidentiality agreements it had with other parties prior to the merger agreement contained “don’t ask, don’t waive” standstill provisions. Shareholders cannot properly evaluate the merger, the complaint claims, unless they know whether other parties could have made a superior proposal

The complaint requests that the court stop the company from proceeding with the merger until the missing information has been made available. 

Article Type: Lawsuit
Topic: Securities
No case events.
Tags: Mergers or Acquisitions, Providing False or Misleading Information, Proxy Statement, Securities