An investor of Netezza Corporation (NYSE:NZ) filed a lawsuit in State Court alleging breaches of fiduciary duty by the NZ board of directors arising out of their attempt to sell Netezza Corp.too cheaply to IBM.
According to the complaint the plaintiff alleges breaches of fiduciary duties by the NZ board of directors owed to NZ investors for trying to sell Netezza Corp via an unfair process at an unfair price to IBM Corp. On Monday, September 20, 2010, Netezza Corporation (NYSE: NZ) and IBM (NYSE: IBM) announced they have entered into an agreement for IBM to acquire Netezza Corp. in a cash transaction at a price of $27 per share or at a net price of approximately $1.7 billion, after adjusting for cash.

The plaintiff alleges that Netezza’s directors breached their fiduciary duties owed to the NZ investors because they did not obtain the highest price. At first sight the IBM offer seems to represent a 7.1% premium, considering NZ shares traded just days before the announcement at $25.20, but Netezza shares increased after the takeover news to as high as $28.57 on Monday and as high as $28.86 on Wednesday. Thus NZ shares traded on the open market since the takeover announcement well above the current offer of $27 and the offered price represents now not only a nominal premium over the $25.20 share price, but IBM would acquire NZ shares currently at a discount to the current market price. In addition the plaintiff claims the offer should also be higher since Netezza has been performing admirably, having net tangible asserts of over $209million and positive cash flow, such as in $0.05 per share in the last quarter and $0.15 per share over the last four quarters. The plaintiff also questions whether the defendants failed to adequately shop Netezza Corporation before entering into the transaction and alleges that the defendants breached their fiduciary duties because they agreed to provisions in an attempt to lock-up the low acquisition price. Despite a no solicitation clause, which bars Netezza Corp. from directly or indirectly facilitating any other competing merger proposals, the defendants also agreed to hefty $56million, or approximately 25% of Netezza Corp’s assets, as a termination fee.