A group of Legato shareholders have filed lawsuits aimed at halting EMC’s planned US$1.3bn acquisition of the company.
Two lawsuits filed yesterday allege that Legato’s board of directors timed the announcement of the acquisition to shed a positive light on the US$1.3bn bid by EMC and to potentially increase their own income rather than protect the interests of shareholders.
The lawsuits claim Legato executives manipulated details of the EMC buyout to protect an executive retention bonus plan. The lawsuits also contend that company leaders chose to announce the EMC deal ahead of Legato’s second quarter financial results, which are due out later this month, to improve the likelihood of the deal being accepted.
Legato counsel have described the lawsuits as “meritless”, and said that documents to be filed with the Securities and Exchanges Commission, the US stock exchange watchdog, would detail facts that would make the assertions made about the bonus plans groundless.
Last week EMC made clear its intentions to acquire Legato, in a move that would add a vast set of capabilities to its products and technologies, particularly in the realm of hierarchical storage management (HSM) and email and content management. The deal is expected to close in the fourth quarter this year, and indicates a growing consolidation in the technology sector. Under the terms of the deal, Legato shareholders will receive 0.9 cents a share of EMC common stock for each share of Legato common stock, valuing Legato at US$1.3bn.
Last week EMC reported encouraging revenue and earnings growth in the second quarter 2003. Revenue for the quarter was US$1.48bn, 7pc higher than the US$1.39bn reported for the second quarter, 2002, while net income was US$82m, compared with US$1m for the same period last year.
By John Kennedy