In a merger of Merix Corporation (Merix) and Viasystems Group, Inc., two of Merix’s shareholders sued for a preliminary injunction claiming that the merger consideration was too low and that there were breaches of fiduciary duty to the shareholders.
Retained by Orrick, Herrington & Sutcliffe
In a merger of Merix Corporation (Merix) and Viasystems Group, Inc., two of Merix’s shareholders sued for a preliminary injunction claiming that the merger consideration was too low and that there were breaches of fiduciary duty to the shareholders. The plaintiffs also alleged that the proxy materials contained inadequate disclosures, the deal contained prohibitive protection provisions, and the target’s board did not market the company actively.
Dr. Allan Kleidon, a senior vice president of Cornerstone Research, worked with counsel on behalf of the defendants. Dr. Kleidon evaluated various aspects of the merger and the merger consideration and rebutted the analysis of the plaintiffs’ expert.
Dr. Kleidon reviewed the valuation analysis performed by Merix’s financial advisor, analyzed information in the market, and examined stock price movements of Merix and its competitors. He found that the plaintiffs’ assertions of inadequate merger consideration were based on flawed assumptions and entirely without merit, and that the additional disclosures that the plaintiffs requested were either not relevant for valuation purposes or not material. He demonstrated that Merix equity holders received a large premium over the value of shares of Merix as a stand-alone entity. Further, he established that Merix’s stock price decline immediately following the merger announcement did not prove that the merger agreement undervalued Merix’s shares. Dr. Kleidon concluded that the merger agreement offered Merix equity holders sufficient compensation for their shares.
The court agreed with the defendants and denied the injunction. Merix’s shareholders subsequently voted to approve the merger.