An investor in Hypercom Corporation (HYC) filed a lawsuit in State Court alleging breaches of fiduciary duties by directors of Hypercom Corp arising out of their attempt to sell Hypercom Corp. too cheaply to VeriFone Systems, Inc.
According to the complaint the defendants breached their fiduciary duties owed to Hypercom Corporation (NYSE:HYC) investors in connection with the proposed takeover.

Phoenix, Arizona based Hypercom Corporation and VeriFone Systems, Inc. announced on November 17, 2010 an agreement under which VeriFone Systems, Inc will acquire Hypercom Corp. in an all-stock transaction valued at approximately $485 million, including net debt assumed by VeriFone. Under the terms of the transaction Hypercom Corp shareholders will receive a fixed ratio of 0.23 shares of VeriFone common stock for each Hypercom (HYC) share they own, valued at approximately $7.32 per share based on the closing price on November 16, 2010.

Shares of Hypercom Corporation traded at roughly $6.60 per share after Hypercom reported on November 2, 2010 its third quarter results with a record net revenue for the three months ended September 30, 2010, of $125.1 million, and a 23.7% increase of $23.9 million in third quarter revenue compared to the third quarter of 2009.

In response to the takeover news HYC shares increased to $7.13 per share.

But the plaintiff claims that the transaction is the result of a flawed process and the offer significantly undervalues Hypercom.

As early as September 24, 2010, VeriFone made an offer to acquire all the outstanding shares of Hypercom Corp. for 0.21 shares of VeriFone followed by an all cash offer. Back on Sept 30 Hypercom rejected the offers saying that the offers significantly undervalued the company. Hypercom said VeriFone Sept.24's all-cash proposal is opportunistically timed to exploit our second quarter 2010 results”, and claimed that the offer was intended to disrupt its business, which has successfully taken market share from VeriFone in several markets.

The current the offer also only offers also meager if any premium to HYC investors considering Hypercom has performed well for its investors in the past. Further Hypercom’s 12 month total revenue went from $248.56million in 2006 to $406.90million in 2009. Hpyercom Corp reported for the first three quarters in 2010 $98.75million, $103.92million, and $125.10million in quarterly Total Revenue. The offer price reflects an inadequate premium to the trading price of the company’s common stock given that Hypercom continues to have record revenue growth, so the plaintiff.