Mergers and acquisitions (M&A) aren’t always just one company buying another, or two businesses agreeing to merge. In fact, these kinds of deals are actually the minority.
Typically the deal is much more complicated. Companies will sell off pieces of their business if doing so makes strategic sense or the price is right.
But what if you own stock in a company selling off a division or branch? Don’t you, as a shareholder, have a say in the matter?
One group of shareholders thinks so. They rose up against a mobile technology giant and an internet behemoth. And the battle is coming to a head… TODAY.
A Typical M&A Deal?
Some shareholders weren’t happy about this, to say the least.
The story goes, Google wanted this particular chuck of Motorola and offered to pay $40 per share in cash, or a total of about $12.5 billion, for it. That’s a premium of 63% to the closing price of Motorola Mobility shares on August 12, 2011 – the day the deal was announced.
The transaction was unanimously approved by the boards of directors of both Motorola and Google.
But, a number of Motorola shareholders weren’t happy with the decision. And they’re still fighting it.
In a press release to the public, the two companies outlined the benefits of the acquisition. The release said that Google and Motorola Mobility together would accelerate innovation and choice in mobile computing. And that consumers will get better phones at lower prices.
The companies also said Motorola Mobility’s patent portfolio will help protect the Android ecosystem. Android, which is open-source software, is vital to competition in the mobile device space, ensuring hardware manufacturers, mobile phone carriers, applications developers, and consumers all have a choice.
Fast-forward to mid-May 2015 when Motorola shareholders received a potentially rewarding letter…
Fight for Your Rights
Shareholders of Motorola received a statement from the Circuit Court of Cook County, Illinois, indicating that if they held common stock of Motorola Mobility Holdings, Inc. during a designated period between 2011 and 2012, their rights may be affected by the partial settlement of a class.
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The class action alleged that Motorola breached its fiduciary duties to common stockholders. The company didn’t disclose sufficient information regarding its approval of Google’s bid for Motorola Mobility. Most importantly, Motorola didn’t disclose why it chose to sell off this division.
The shareholders bringing the case against the company feel this information should have been provided to all shareholders prior to the effective date of the acquisition – meaning when the Board of Directors made their decision to approve the acquisition.
The laundry list of requested information includes Motorola’s financial projections for fiscal years 2011 through 2015, reports from various financial advisors to Motorola, and the conversion of equity rewards with respect to stock held by Motorola employees.
The defendants – consisting of Motorola Mobility, a few of its directors, and Google – contend that the allegations were meritless, and have denied and continue to deny all allegations and claims of wrongdoing.
A Partial Settlement
The court didn’t decide in favor of either side. Instead, both sides agreed to a partial settlement, thereby avoiding the uncertainty and expense of further litigation.
Motorola, as part of a partial settlement, made supplemental disclosures in a filing with the SEC in November 2011. Additionally, it capped legal fees to the plaintiff’s attorneys at $750,000, subject to terms of the agreement.
Now, we’re left waiting to see if the partial settlement will be approved. If so, all claims against Motorola and the defendants will be released.
The decision will be made today at a “fairness hearing” in the Circuit Court of Cook County.
If the court approves the partial settlement, the parties will ask the court to enter a final order approving it.
Of course, the court may adjourn or continue the hearing without further notice, meaning we don’t know how long it will take for a decision to be made.
Keep attuned to what transpires today.
Likely, the case will be settled for some “reasonable” sum. Google, of course, will remain happy with its acquisition, Motorola will be annoyed but relieved, and shareholders can finally move on.
But if the case isn’t approved, it wouldn’t bode well for Motorola or its stockholders.
Even more important, it could potentially change the landscape of M&A going forward in terms of what information should be disclosed to shareholders prior to an acquisition.