Compellent Technologies, Inc. Investors File Lawsuit In Effort To Stop Buyout

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Company Name(s): 
Compellent Technologies
Case Name: 
Compellent Technologies Deal Case 12/17/2010
Case Status: 
Lawsuit Filed
Affected Securities
NYSE: CML
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
12/17/2010
Summary: 

An investor in Compellent Technologies, Inc. (NYSE:CML) shares filed a lawsuit in State Court against Dell, Compellent and its board of directors seeking to block Dell from taking over Compellent Technologies, Inc. at a value of $27.50 per CML share

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties arising out of the attempt to sell Compellent Technologies, Inc. too cheaply via an unfair process to Dell.

On Thursday, Dec. 9, Compellent Technologies, Inc. had announced Dell (NASDAQ: DELL) and Compellent Technologies, Inc. (NYSE: CML) are engaged in advanced discussions regarding a possible business combination involving the two companies. Compellent Technologies said they have entered into an exclusive agreement to negotiate a merger agreement in which Dell would acquire all of the outstanding common stock of Compellent Technologies at a price of $27.50 per share in cash. Then on December 13, 2010, Compellent Technologies and Dell announced that they have entered into a merger agreement under which Compellent Technologies stockholders will receive $27.75 in cash for each share of Compellent Technologies/CML common stock.

But shares of Compellent Technologies, Inc. (NYSE: CML) traded during the last two trading days before the announcement on Dec. 9 at roughly $34 per share before declining to under $29 per share on Friday and then falling under $28 in response to the buyout announcement. In addition according to Thompson/First Call, analysts have set a price target as high as $40.00 per share for Compellent stock and the stock in the open market trades above the current offer. Dell’s offer not only provides no premium to CML investors but a discount to Dell. Thus the plaintiff alleges in the class action complaint that the “offer is “grossly inadequate and at a deep discount to the market value of the company” Shares of Compellent Technologies, Inc. traded prior and short after the announcement of the $27.75 offer at an above the current offer price in the open market. In addition Compellent Technologies has performed well in the past for its shareholders. Compellent Technologies’ 12 months Total Revenue went from $23.33million in 2006 to $125.28million in 2009. Its Net Income over the same time frame went from a Net Loss in 2006 to a Net Income of $4.79million in 2009. For the first three quarters in 2010 Compellent Technologies, Inc. reported a combined 9months Total Revenue of $110.38million with a combined 9months Net Income of $2.36million.