On October 12, 2016, the Honorable Tamika Montgomery-Reeves, Vice Chancellor of the Delaware Court of Chancery, granted final approval of the proposed settlement in In re Mavenir Systems, Inc. Stockholders Litigation, C.A. No. 10757-VCMR. Faruqi & Faruqi, as lead counsel (“Lead Plaintiff”), obtained significant benefits to stockholders discussed below. The settlement established a $3,000,000 common fund that will be distributed to the stockholders of Mavenir Systems, Inc. (“Mavenir”). The settlement arises from the acquisition of Mavenir by Mitel Networks Corporation (“Mitel”), which was announced on March 2, 2015, and closed on April 29, 2015.
Before the deal closed on April 28, 2015, the parties agreed to a settlement where Defendants agreed to reduce the termination fee from $20.625 million to $8.4 million under certain circumstances; reduce the matching rights period from four business days to one business day; eliminate Mavenir’s obligations to notify Mitel about a superior offer from a third party; and release certain stockholders, collectively owning 45% of the company, from certain provisions in their tender and support agreements which required them to vote 22.5% of the company’s shares in favor of the transaction even if the company changed its recommendation to accept a superior proposal. Taken together, these transaction term modifications opened up the sale process to effectively allow third party bidders. Defendants also agreed to correct several material disclosure issues in Mavenir’s Recommendation Statement, including disclosure of the fact that Mavenir’s financial advisor held a 3.9% ownership stake in Mitel, a fact Mavenir’s board was previously unaware of.
During confirmatory discovery in support of the initial settlement, Lead Plaintiff discovered that the merger consideration was allegedly reduced by $0.06 per share in order to fund a retention plan benefitting certain Mavenir executives, including the company’s CEO. Although rare in M&A litigation, Faruqi & Faruqi walked away from the initial settlement to further pursue the case based on the newly discovered information.
The parties ultimately agreed to mediate before the Honorable William B. Chandler, former Chancellor of the Delaware Court of Chancery, an experienced practitioner of Delaware’s corporate law. After mediation and subsequent negotiations, the parties agreed to establish a $3,000,000 common fund, which would ultimately be distributed to Mavenir’s former stockholders.
The $3,000,000 common fund is a significant win for Mavenir stockholders. It is also an atypical result because the shareholders will receive more than the $0.06 per share purchase price reduction ($1,866,000) plaintiff believes resulted from misconduct by Mavenir’s former CEO.