Aruba Investors Sue for More in HP Deal, End Up With Less
(Bloomberg) -- Two Aruba Networks Inc. investors who complained they didn’t get enough when HP Inc. bought the company for $2.7 billion ended up with even less after they sued.
Verition Partners Master Fund Ltd. and Verition Multi-Strategy Master Fund Ltd. asked a Delaware state judge to determine whether HP Inc.’s agreement to pay $24.67 per share was an appropriate price for Aruba. Vice Chancellor J. Travis Laster ruled on Thursday that the deal was more than fair. He awarded the Verition funds $17.13 per share, or the price before the deal was announced in 2015, plus interest.
"The judge obviously looked at where the stock had been trading up until the deal, and gave the appropriate weight not only to the deal price but the market price," said Michael P. Kelly, a lawyer for Aruba. "I think the vice chancellor got it right."
The ruling shows the increased risk investors face when challenging deals in appraisal actions before the Delaware court. In the state’s chancery court, investors can ask judges to evaluate prices for fairness, but must take whatever amount the court finds is appropriate.
“Aruba urged that its pre-transaction market price is the single most important mark of its fair value,” Marc Sonnenfeld, a lawyer for Aruba said in a statement. "We are gratified that the Chancery Court agreed."
Two 2017 decisions by the state’s Supreme Court have made it harder for investors to come out ahead in such challenges, by putting more weight on the stock market’s value, Kelly said. The decisions were reached in deal appraisal cases involving DFC Global Corp. and Dell Inc. Before then, it was unusual for investors to end up with less than the price they were challenging.
"The Aruba opinion is theater of the absurd," Stuart Grant, a lawyer for the Verition funds, said in an email. "But that was likely its intent. It shows how foolish the Delaware Supreme Court’s opinions in Dell and DFC are when applied to other cases."
Sunnyvale, California-based Aruba, sold components for wireless local area networks and competed with Cisco Systems Inc. The company announced it was being acquired by HP in March 2015.
The investment funds "proved that the company’s negotiators might have done better, but there is no reason to believe that they left any of Aruba’s fundamental value on the bargaining table," the judge said. "In the context of this case, the unaffected market price provides the most persuasive evidence of fair value."
The case is Verition v. Aruba, 11448, Court of Chancery of the State of Delaware (Wilmington).
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