Gigamon Inc. (NYSE:GIMO) is the subject of a wave of class action investigations following the tabling of a $1.6 billion takeover bid by Elliot Management. The hedge fund through its private equity arm, Evergreen Coast Capital, has agreed to pay $38.5 a share, representing a 7% premium, to acquire the software developer.
Class Action Probe
A number of law firms have since raised concerns on whether the company’s board of directors fulfilled its fiduciary duties with regards to shareholders interest in the proposed takeover.
Ongoing investigations center on whether Gigamon board pursued other alternatives that could have led to a much higher acquisition bid. Law firms led by Johnson Fistel LLP and Bragar Eagel & Squire P.C are also questioning whether the board obtained the best price possible for Gigamon shares.
Gigamon Chief Executive Officer, Paul Hooper, has quashed the concerns by reiterating the transaction will deliver immediate cash value to shareholders upon closing.
“The Gigamon Board, with the assistance of independent financial and legal advisors, conducted a thorough review of options to enhance shareholder value and unanimously concluded that entering into this agreement with Elliott represents the best way to maximize value,” said Mr., Hooper.
Institutional Holding
Elliot Management proposed takeover does not come as a surprise given that it is one of the largest shareholders in the company. The activist investor has reportedly held, on and off, talks for several months about the possibility of acquiring the company. Talks initially broke down because of price disagreements.
Regulatory filings indicate that Elliot Management owns 2.63 million shares of Gigamon common stock representing a 7% stake. Blackrock has a holding of 3.94 million shares in the company as Vanguard Group Inc. owns 2.95 million shares.
Gigamon makes software used in large data centers, to boost the flow of traffic and prevent bottlenecks. Evergreen’s managing director, Isaac Kim, says they have hired a competent team that will help the company come up with new products as well as explore other acquisitions that will help accelerate growth.
Gigamon Inc. (NYSE:GIMO) comes into the deal after reporting a third-quarter profit of $2.2 million despite revenue dropping 5.1% to $79.2 million.
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