Transcend Services, Inc. (NASDAQ:TRCR) Investor Files Lawsuit Against Directors Over Alleged Breaches Of Fiduciary Duties In Takeover

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Company Name(s): 
Transcend Services
Case Name: 
Transcend Services Deal Case 03/27/2012
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: TRCR
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
03/27/2012
Summary: 

San Diego, March 28, 2012 (Shareholders Foundation) -- An investor in NASDAQ:TRCR shares filed a lawsuit in State Court against directors of Transcend Services, Inc. in effort to block the proposed takeover of Transcend Services, Inc.by by Nuance Communications, Inc. for $29.50 per NASDAQ:TRCR share.

According to the complaint the plaintiff alleges that directors of Transcend Services, Inc. breached their fiduciary duties owed to NASDAQ:TRCR stockholders arising out of the attempt to sell Transcend Services, Inc. at an unfair price via an unfair process to Nuance Communications, Inc..

On March 7, 2012, Transcend Services, Inc. (NASDAQ: TRCR) and Nuance Communications, Inc. (NASDAQ: NUAN) had announced an agreement for Nuance Communications, Inc. to acquire Transcend Services, Inc. for approximately $300 million, net, in cash. Under the terms of the proposed transaction Nuance Communications, Inc. has agreed to acquire Transcend Services, Inc. through a cash tender offer of $29.50 per Transcend Services, Inc. share.

However, the plaintiff alleges that the $29.50offer is too cheap and undervalues the company. In fact, NASDAQ:TRCR shares traded as recently as October 24, 2011 at $28.71, respectively on November 4, 2011 at $28.45, thus leaving some NASDAQ:TRCR stockholders with only a meager premium. Additionally, NASDAQ:TRCR shares traded in July 2011 as high as $29.90 per share thus offering those stockholders a discount. Furthermore, at least one analyst has set the high target price for NASDAQ:TRCR shares at $34 per share. Furthermore, the plaintiff says the Transcend Services, Inc is a strong company with the potential for greater future growth. Indeed, Transcend Services, Inc has also performed well for its investors in the recent past. Its annual Revenue rose from $48.70million in 2008 to $125.06million in 2011 and its Net Income surged from $5.77million in ’08 to $19.04million in 2011.

In addition, so the plaintiff, the defendants have agreed to deal protective devices, such as a $9.9million termination fee provision, a no solicitation clause, and tender and voting agreements, which effectively ensure the sale of Transcend Services, Inc to Nuance Communications and also deter other buyers from offering a superior price for Transcend Services, Inc.