TEKELEC Investors File Lawsuit Against Going-Private Bid

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Company Name(s): 
TEKELEC
Case Name: 
TEKELEC Deal Case 11/11/2011
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: TKLC
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
11/11/2011
Summary: 

San Diego, Nov. 11, 2011 (Shareholders Foundation) -- Two investors in TEKELEC (NASDAQ: TKLC) shares filed a lawsuit against the board of directors in effort to stop the proposed sale of Tekelec for $11 per share.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties owed to TEKELEC (NASDAQ TKLC) investors arising out of the attempt to sell Tekelec at an unfair price thorugh an unfair and self-serving process.

On Monday, Nov. 7, 2011, Tekelec (NASDAQ: TKLC) announced that it has entered into an agreement to be acquired by a consortium led by Siris Capital Group, LLC and including affiliates of The ComVest Group, funds and accounts managed by GSO Capital Partners LP, Sankaty Advisors LLC, ZelnickMedia and other Siris limited partners and affiliates. The transaction is valued at approximately $780 million. Under the terms of the proposed transaction, all outstanding shares of Tekelec’s common stock will be acquired for $11.00 per share in cash.
Tekelec said the $11offer represents an 11% premium over the closing price on November 4, 2011, and a 38% premium over the 30 day trading average closing price of Tekelec common stock.

However, the plaintiffs allege the $11offer undervalues the company. The plaintiffs say that in October 2011, TKLC shares climbed from a close of $5.70 on Oct. 3rd to a high of $10.36 on October 27th, an increase of approximately 80% in the span of one month. In fact, shares of TEKELEC (Public, NASDAQ:TKLC) traded as early as February at $12.04 and January at $13.28 per share, leaving certain TKLC stockholders with no premium, but asking them to hand over their TKLC stocks at a discount. Additionally, at least one analyst has set the high target price for TKLC stocks at $16 per share.

Further the plaintiffs claim that the defendants further breached their fiduciary duties by agreeing to preclusive deal protections devices, such as a no-solicitation, a matching rights, and a non-mutual $15million termination fee provision, which further diminish the chances of obtaining maximum value for the company’s shareholders by collectively precluding any competing offers for Tekelec.