(CN) - A shareholder class action in Maryland demands revisions to the proxy statement for Cisco's pending $1.9 billion buyout of business-communication firm BroadSoft because the document allegedly lacks key financial projections and an explanation of its discounted cash-flow analyses.
According to the complaint, the proxy statement for the $55-a-share buyout "omits material information" about BroadSoft and the acquisition, rendering the statement "false and misleading" to BroadSoft shareholders.
With respect to BroadSoft's financial projections, the pleading claims the proxy does not properly disclose net operating losses, amortization of intangible assets, losses on the repurchase of certain convertible notes and other calculations.
Echoing a common theme in legal challenges to merger proxy-statements, the lawsuit focuses on alleged deficiencies in discounted cash flow analysis. It claims the BroadSoft proxy's section on a DCF analysis completed by advisor Qatalyst "fails to disclose ... the inputs and assumptions underlying the discount rate range." The analysis allegedly omits the number of fully diluted BroadSoft common stock shares, as well as the company's estimated cash balance as provided by management.
Likewise, the lawsuit chides BroadSoft for alleged lack of disclosure of total debt, cash, cash equivalents, and a slew of other financial inputs in a parallel discounted cash flow analysis by Jefferies, a second advisor to BroadSoft in the deal.
Shareholders additionally have not been apprised of the "timing and nature of all communications regarding future employment" of BroadSoft executives and directors.
Full disclosure of communications between BroadSoft and Cisco regarding post-acquisition employment opportunities is necessary for shareholders to understand BroadSoft managers' "potential conflicts of interest" in approving the merger, the class claims.
Lead plaintiff Anthony Franchi wants the court to halt the merger until the purported deficiencies in the proxy statement are addressed.
He's represented by Thomas Minton at Goldman & Minton in Baltimore, with Rigrodsky and Long in Wilmington, Delaware and RM Law in Berwyn, Pennsylvania of counsel.
BroadSoft, its board of directors including director/CEO Michael Tessler, and Cisco are listed as defendants.
Tessler said in a public statement that the buyout "represents the culmination of a robust process undertaken by
BroadSoft's Board of Directors to maximize shareholder value."
"As businesses continue to move toward the cloud in search of simplicity and speed, joining Cisco will allow us to deliver best-in-class collaboration tools and services," Tessler said.
The acquisition is scheduled to close in early 2018. BroadSoft's employees are expected to join Cisco's Unified Communications Technology division.
BroadSoft, a provider of internet cloud-based communication solutions for businesses, in fiscal year 2016 reported 3-cents-a-share in earnings on roughly $340 million in revenue. The buyout price represented a more than 25-percent premium to BroadSoft stock's closing price the day before news broke in August that the company was pursuing a merger.
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