Investors say Covad price low
Phone provider being bought by Platinum
By SOPHIA PEARSON, Bloomberg News
Posted Sunday, December 23, 2007
Covad Communications Group Inc., the Internet phone provider being bought by Platinum Equity Holdings LLC, has been sued by investors who claim the sale price is too low.
Covad directors are allegedly seeking to coerce shareholders into approving the merger, according to a complaint filed last week in Delaware Chancery Court in Wilmington. Covad CEO Charles Hoffman and other directors didn't make public an addendum to the deal giving Platinum management control prior to a shareholder vote, the investors claimed.
"The merger is effectively presented to shareholders as a fait accompli as Platinum is already in the driver's seat," shareholders Robert Vilardi and Ellen Goldberg-Linzer said in their complaint. Platinum is a Beverly Hills, Calif.-based venture capital firm that operates technology companies.
Platinum agreed to buy Covad in October for $304 million in cash, or $1.02 a share, to capitalize on growth in high-bandwidth services. Covad agreed to an "excessive" $12 million termination fee, amounting to 3.95 percent of the equity value of the transaction, the complaint said. In addition, the company will pay Platinum $500,000 a month for day-to-day management services.
Vilardi and Goldberg-Linzer are seeking class-action, or group, status to represent all Covad shareholders. The two have requested unspecified damages.
The shareholders claim the management agreement gives Platinum the ability "to shape the future course of the company" and requires payments be made months before the merger is completed, according to the complaint.
Covad directors failed to make the agreement public and only mentioned it briefly in filings with the U.S. Securities and Exchange Commission, Vilardi said in the complaint. |
