Cysive Inc. said yesterday that a judge has dismissed a shareholder class-action lawsuit that challenged a plan to sell the Reston software firm to its founder.
The first of the shareholder lawsuits was filed briefly after the company announced on May 31 that the board had accepted Nelson A. Carbonell Jr.’s offer to take the company private for $92 million, or $3.22 per share.
Institutional shareholders were incensed because the news came only two weeks after the company announced the hiring of Broadview International LLC, an investment bank, to advise the board on a possible sale. They were particularly upset because the company, which has never made a profit, had $129 million in cash on its balance sheet as of March 31, an amount far greater than Carbonell’s offer.
But the company revealed in a June proxy statement that its board had hired Broadview International in January, much earlier than shareholders originally believed.
The company also revealed in its filing that Broadview had contacted 37 potential buyers, none of whom were willing to pay more than Carbonell’s offer of $3.22 a share. An independent firm hired by the board determined that the liquidation value of Cysive was $3.16 per share as of May 29.
The Delaware Chancery Court dismissed the shareholder class-action lawsuit on Aug. 15 and concluded the buyout offer and its acceptance were fair.
“It feels great,” Carbonell said in an interview yesterday. “We basically went to trial because we felt the suit didn’t really have any merit. If you announce that you’re selling the company, employees and potential customers may run away and diminish the value of the thing you’re trying to sell.”
Robert L. Chapman Jr., the founder of Chapman Capital, a hedge fund in El Segundo, Calif., was a plaintiff in the case but said he was happy the suit had been dismissed. Once shareholders learned that Broadview had been retained in January instead of May, “the basis for our suit no longer existed,” he said.
Chapman added that he did believe that Carbonell had an ethical obligation to at least pay the cash value of the firm because Carbonell sold stock worth $62.6 million at $87 a share in Cysive’s initial public offering, at the height of the tech boom.
Carbonell said that when he buys Cysive, he plans to lay off 25 to 30 of its 52 employees and run the company as a start-up.
Cysive’s main product is a customer-support software package called Cymbio. The company has never sold a copy of the software, which has been on the market for more than a year. The company reported a loss of $5.3 million and revenue of $55,000 for the quarter ended June 30.
Carbonell said he is still committed to finding customers for the software and blamed the technology slump for its failure.
Reported By TechNews.com, http://www.TechNews.com
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