Private Equity Firm sues Intel over Failed Acquisition

37Celsius Capital Partners is suing Intel for not following through with an acquisition proposal for their subsidiary Care Innovations. The plaintiffs allegedly incurred hundreds of thousands of dollars in legal fees pursuing the acquisition and made binding agreements that were broken by Intel.

Intel is represented by Quarles & Brady. The plaintiffs, represented by O’Neil Cannon Hollman Dejong & Laing, are two entities of an investment firm that focuses on investments in companies specializing in remote healthcare technology, or the “connected healthcare” industry.

Alexander Kempe, CEO of 37Celsius Capital Partners or 37c, was previously an executive at General Electric Health where he was involved in a partnership with Intel creating defendant Care, a company that creates collaboration platforms used in remote patient monitoring. After he left GE Health, Intel became the sole owner of Care and solicited offers to sell a controlling interest in the company discussing prices and deals with the Plaintiff and some of its competitors including iSeed Ventures. 

According to the complaint, “Defendants were simply contacting Plaintiffs in order to get a higher price for selling a controlling interest in Care or to induce iSeed to consummate the sale of a controlling interest in Care.” 37 Celsius Capital Partners said it agreed to a term sheet with the defendants with some binding provisions, including “neither Care Innovations nor any of its representatives … nor Intel shall initiate, solicit, entertain, negotiate, accept or discuss, directly or indirectly, any proposal or offer from any person or group of persons (other than 37c and its affiliates) to acquire all or any significant part of the business and properties, equity interests of Care Innovations and/or  its subsidiaries, whether by merger, purchase of equity, purchase of assets or otherwise.” The provision also said they could not provide non-public information to a third party or enter into an agreement to abandon the transaction with 37Celsius Capital Partners.

The plaintiffs claim they would not have incurred fees pursuing the acquisition if they had not had the exclusivity provision in their term sheet. “Defendants completely ignored and directly breached the exclusivity provision in the Term Sheet. Specifically, Defendants secretly initiated, solicited, entertained, and negotiated the potential sale of Care to iSeed during the entire time that Defendants were bound by the exclusivity provision in the Term Sheet,” the complaint states. It says the two parties agreed on final documents and signed an operating agreement before the anticipated closing date in February of 2017, but the paperwork was not completed at that time.

Before the paperwork was completed, they learned on March 1, 2017 that the defendants were in breach of the term sheet and “had been lying in the weeds and secretly using their agreement with Plaintiffs to negotiate a better deal with iSeed,” as defendants closed their agreement with iSeed for $6 million more than the offer from 37c.

The petition alleges Intel acknowledged the main reason they breached the term sheet was the ability to get more money from iSeed. However, they never gave notice to the plaintiffs that they were ending their agreement. The Plaintiffs demand at least $6 million in damages and a trial by jury.