Numerex Merger Omissions of Information Securities Class Action

Numerex Corporation works with the “Internet of Things,” that is, the interconnected network of devices that communicate with each other via the Internet. On August 3, 2017, the company announced that it had formed a merger agreement to sell Numerex to Sierra Wireless, Inc. But according to the complaint for this class action, the Form F-4 Registration Statement filed with the Securities and Exchange Commission (SEC) omits or misrepresents material information, which the complaint alleges is a violation of the Securities Exchange Act of 1934.

The class for this action is all persons and entities who own Numerex common stock.

In January 2017, Numerex terminated its CEO and installed a new one, and the complaint alleges that new plans made its financial outlook strong. The complaint says these expectations were supported by its 2017 first-quarter results, announced in May of 2017.

The Merger Agreement came in August, just a few months later. It provides for Numerex stockholders to receive 0.1800 shares of Sierra common stock for every share of Numerex common stock that they own, at a value of approximately $5.34. But according to the complaint, a number of things were left out of the Registration Statement that stockholders need in order to evaluate the deal.

Financial Projections: The complaint alleges that the Registration Statement does not give sufficient information about the financial projections for both Numerex and Sierra that advisor Deutsche Bank relied on for its analyses. Without information as to how projections were calculated, stockholders cannot judge if the projections are reliable.

Data and Inputs: The complaint claims that the Registration Statement omits data and key inputs underlying the financial valuation analyses on which Deutsche Bank bases its opinion that the offering is fair. Stockholders cannot judge the accuracy of the analysis or appropriately weigh Deutsche Bank’s opinion.

Sales process: The complaint claims that more information is needed on exactly how the sale process unfolded, for several reasons.

First, the complaint alleges that Numerex’s officers have conflicts of interest because they will be the primary beneficiaries of the transaction, with substantial “golden parachute” compensation.

Second, the complaint claims that the Registration Statement does not detail the terms of the non-disclosure agreements (NDAs) between Numerex and other parties, including whether the NDAs are still in effect and whether they contain “standstill provisions” that keep the parties from making better offers for Numerex.

Third, while the Registration Statement admits that Sierra’s financial advisor gave Deutsche Bank an update that meant that Sierra could no longer agree to the exchange ratio in an earlier agreement letter, it did not disclose any details as to what led to the lowering of the exchange ratio.

For all three of these reasons, the complaint claims that the Registration Statement should provide more information on the process that led to the final transaction agreement.

According to the complaint, all this missing information adds up to a violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 as well as Rule 14a-9.

Article Type: Lawsuit
Topic: Securities
Tags: Mergers or Acquisitions, Registration Statement, Securities