ArcSight Inc. Investor Files Lawsuit

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Company Name(s): 
ArcSight
Case Name: 
ArcSight Deal Case 09/13/2010
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: ARST
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
09/13/2010
Summary: 

An investor of ArcSight Inc. (NASDAQ:ARST) filed a lawsuit in State Court against members of the board of directors of ArcSight alleging breaches of fiduciary duty arising out of their attempt to sell ArcSight Inc. too cheaply to Hewlett-Packard Company.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duty owed to the public shareholders of ArcSight Inc. (NASDAQ:ARST) by attemping to sell ArcSight to Hewlett-Packard Company via an unfair process and at an unfair price.

On Monday, Sept. 13,. 2010, HP and ArcSight, Inc. announced that they have signed anagreement for HP to acquire ArcSight for $43.50 per share, or an enterprise value of $1.5 billion. On August 27, 2010, the Wall Street Journal reported that ArcSight put itself up for sale and that the company “expects to fetch more than $40 a share.”

ArcSights’ revenue increased almost 200% over the past four years. While ArcSight Inc. reported $69.83million in revenue for the past 12months on April 30, 2007, it was able to report $181.38million in revenue for the past 12 months on April 30, 2010. Its Net Income went from a Net Loss of $0.26million reported on April 30, 2007 to a Net Income of $28.39million reported on April 30, 2010.

The plaintiff alleges, among other things, that the market has already signaled its dissatisfaction with the offered price, since shares of ArcSight Inc. (Public, NASDAQ:ARST) traded after the announcement as high as $44.25, thus above the current offer of $43.50 per share. In addition the plaintiff claims that despite a $61 million dollar termination fee, 3day matching rights, a no-solicitation clause and other defensive mechanisms, the proposed takeover is unfair to ArcSight’s public shareholders because the defendants agreed to a so called ‘top-up opinion” that gives HP over 115 million ArcSight shares and those shares, when added to shares held by Company insiders, will allow defendants to deliver ArcSight to HP without the approval of the majority of the company’s public shareholders.