An investor in Terremark Worldwide, Inc. (NASDAQ:TMRK) filed a lawsuit in State Court against directors of Terremark Worldwide for allegedly breaching their fiduciary duties arising out of their attempt to sell Terremark Worldwide too cheaply via an unfair process to Verizon Communications.
According to the class action complaint the plaintiff alleges that the defendants breached their fiduciary duties in connection with the proposed takeover, which is a product of a flawed process that is designed to ensure the proposed merger between Terremark and Verizon on terms preferential only to Verizon and Terremark's board members, but detrimental to plaintiff and other public stockholders of Terremark.

After the market closed on Thursday, Jan 27, 2011, Terremark Worldwide Inc. (Nasdaq: TMRK) and Verizon Communications Inc. (NYSE, Nasdaq: VZ) had announced an agreement under which Verizon will acquire Terremark Worldwide Inc, for $19.00 per share in cash or a total equity value of $1.4 billion. Terremark Worldwide Inc said the tender offer price constitutes a premium of 35 percent per share over Thursday's closing price.

On November 2,Terremark's stock soared on strong 3Q revenue from $9.76 per share to over $11 per share. Before the takeover announcement shares of Terremark Worldwide, Inc. (Public, NASDAQ:TMRK) closed on Thursday at $14.05 per share.

At first sight the offer by Verizon Communications Inc might look like a significant premium, but the plaintiff claims that the offer substantially undervalues the company. Terremark Worldwide, Inc. has performed well for its shareholders. Terremark Worldwide’s 12 months Total Revenue increased over the past four filing periods from $100.95million to $292.35million. In addition Terremark Worldwide, Inc. also announced that Verizon Communications Inc has also entered into agreements with three stockholders of Terremark Worldwide, Inc. to tender their shares into the offer, representing approximately 27.6 percent of the outstanding voting shares of Terremark. Further the plaintiff claims that the board members clearly were more concerned with securing continued employment for themselves than fulfilling their fiduciary duty to maximize shareholder value. Furthermore the plaintiff alleges that the merger agreement contains certain “ lockup provisions” which prohibit the board from soliciting superior offers for the company shareholders and require Terremark Worldwide to pay Verizon Communication a $52.5million termination fee in the event that the board does terminate the transaction in favor of a superior offer. The plaintiff says those lockup provisions unduly bind the board to the proposed merger and make it entirely unlikely that the board members will fulfill their fiduciary duty to shareholders in the future.