A CommScope investor filed a lawsuit in State Court against directors of CommScope over alleged breaches of fiduciary duty arising out of their attempt to sell CommScope too cheaply to Carlyle Group
According to the complaint the plaintiff alleges that the defendants breached the fiduciary duties owed to CommScope, Inc. (NYSE:CTV) investors by attempting to sell CommScope via an unfair process at an unfair price.

On Monday, October 25, 2010, CommScope, confirmed that it is in discussions with the Carlyle Group regarding a potential transaction that would result in CommScope becoming a private company. Then on Wednesday, Oct. 27, CommScope, Inc. announced that it entered into a merger agreement with the Carlyle Group in a transaction valued at approximately $3.9 billion. Under the terms of the merger agreement, Carlyle offered to acquire all of the outstanding shares of CommScope common stock for $31.50 per share in cash. CommScope said the offer represents a premium of approximately 36% over CommScope’s closing stock price on Friday, October 22, 2010, the last trading day prior to CommScope’s Monday, October 25, 2010 announcement, and a premium of approximately 39% over the average closing share price of CommScope’s common stock for the 30 days ended October 22, 2010.

But the plaintiff alleges that the defendants agreed to a buyout offer that undervalues CommScope as Carlyle Group and CommScope directors at the expense of CommScope’s shareholders are taking advantage of a drop in company shares. Even though CTV shares jumped in response to CommScope’s merger talks confirmation from $23.12 on Friday Oct. 22 to $30 per share on Monday, Oct. 25., and then increased to $31.28 after the takeover was announced on Wednesday, CTV shares were currently down from its current 52weekHigh of $34.95 per share and traded as recently as May 3, 2010 at $32.68. CTV shares closed last weeks trading on Friday at $31.66 per share, thus above the current offer. Given the May trading price, its current 52weekHigh, an analyst price target for CommScope stock at $36.00 per share, and its current above the current offer open market price, CommScope investors would presently not receive any premium at all, but rather give their shares to Carlyle Group at a discount.

Further more the plaintiff says the sale process is unfair to CTV investors. The plaintiff said CommScope executives are favoring the Carlyle Group over other potential bidders as Carlyle guarantees their continued employment and the CommScope Chief Executive Officer Frank Drendel and other directors would fare better than CTV investors in the proposed transaction. The plaintiff claims that six CommScope executives would receive almost $19million in severance or change of control payments or both if they leave within two years of a change of control. Chief Executive Officer Frank Drendel alone would receive as much as $6.6 million, so the plaintiff.

CommScope, Inc. reported in 2007 Total Revenue of $1.93076billion, in 2008 $4.01656billion, and in 2009 $3.02486billion.In the first two quarters in 2010 CommScope, Inc. reported $721.61million, respectively $838.13million in Total Revenue. As recent as October 27, 2010, CommScope announced its third quarter 2010 financial results wherein the Company reported net sales of almost $822 million which was a 10% increase over the same period in 2009.