At least two investors in ATHR shares filed lawsuits against the board of directors of Atheros Communications in effort to block the proposed takeover of Atheros Communications by Qualcomm.
According to the class action complaints the plaintiffs alleges, among other things, that the directors breached their fiduciary duties to the shareholders of Atheros Communications by failing to adequately shop Atheros Communications before entering into the proposed transaction at an inadequate price.

On Tuesday, Jan. 5, 2011, Atheros Communications, Inc. (Nasdaq: ATHR) and Qualcomm Incorporated (Nasdaq: QCOM) announced that they have entered into an agreement whereby Qualcomm Inc. intends to acquire Atheros Communications, Inc for $45 per ATHR share in cash, representing an enterprise value of $3.1 billion.
Prior the New York Times said already on Monday that Qualcomm Inc. is close to buying Santa Clara, California based Atheros Communications and ATHR Shares increased prior to the official announcement from $37.16 per share to $44.53 per share and closed Tuesday’s trading $44 per share. On Wednesday after the buyout announcement was made public ATHR shares increased then to $44.65 per share.

But the plaintiff further alleges that the board of directors breached its fiduciary duties by agreeing to onerous and unreasonable deal protection devices, including a ‘no-shop’-provision and a steep $103.7million termination fee that may effectively preclude other topping bids.

The plaintiff also claims the premium being offered through the merger agreement inadequate and undervalues Atheros Communications, Inc given Atheros's recent results and promising new networking products. Atheros Communications has performed exceptionally well for its shareholders. Despite the financial crisis Atheros Communications’ 12months Total Revenue increased over the past four years by almost 80%. Atheros Communications Total Revenue went from $301.69million in 2006 to $542.47million in 2009. Its Net Income over the same time frame increased by almost 150%. Its Net Income increased from $18.68million in 2006 to $46.41million in 2009. For the first three quarters in 2010 Atheros Communications reported a combined 9months Total Revenue of $700.02million succeeding its 2009 12 months Revenue already with a 9months Total Revenue by almost 30%. Atheros Communications reported a combined 9months Net Income for the first three quarters in 2010 of $77.59million succeeding its 2009 12 months Net Income already with a 9months Net Income by almost 70%. Further ATHR shares traded as early as April at over $42 per share leaving ATHR investors with only a meager premium.

Even though the offer represents a 21.6 percent premium the plaintiff claims the offered premium is well below the average premium paid for recent acquisition in the industry and the deal would unfairly benefits Atheros Communications’ senior management to the detriment of the company’s shareholders.