another lawsuit has been filed in California State Court on behalf of current shareholders in DivX, Inc., who purchased their shares before June 2, 2010. The two lawsuits allege that members of the DivX board of directors breached their fiduciary duties by selling DivX, Inc. to Sonic Solutions at a discounted price. The lawsuits also allege that the DivX board of directors failed to adequately shop DivX to other buyers, and negotiated oppressive deal protection measures to the detriment of DivX shareholders. These deal protection measures prevent other companies from making competing offers, thereby depriving DivX shareholders of the full value of their shares.
According to the lawsuits, the specific deal protection measures are (1) a “no-shop” provision that restricts the DivX board of directors from soliciting alternative proposals; (2) a $8.35 million termination fee to be paid to Sonic if the DivX board of directors agrees to a competing proposal; and (3) a “no-talk” provision that restricts DivX’s ability to engage third-parties regarding competing offers. The lawsuits allege that the “no-shop” provision, the “no-talk” provision, and the termination fee are unjustifiably restrictive terms that preclude any potential buyer from coming forward with a better offer for DivX shareholders.

Under the terms of the deal, DivX shareholders will receive $3.75 in cash and 0.514 shares of common stock for each share of DivX they hold. As of June 30, the closing price of Sonic Solutions common stock was $8.41, resulting in total consideration for DivX shareholders of approximately $8.04. But according to the lawsuits, analysts have set target prices for DivX stock above $10.00.

DivX, Inc., located in San Diego, California, is a digital media company. It creates, distributes, and licenses digital video technologies that span the three screens comprising consumer media environment: the personal computer (PC), the television, and mobile devices. DivX, Inc. reported in 2007 total revenue of $84.86 million, in 2008 $93.91 million, and in 2009 $70.61 million.