Law Street Media

Semiconductor Company Sued Over Proposed Merger

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Engineer plugging CPU microprocessor to motherboard socket. Computer technology and hardware maintenance or repair.

On Tuesday, a common stock shareholder of semiconductor company Inphi Corporation filed a complaint in the Southern District of New York against the company and its board of directors for their purported Securities Exchange Act of 1934 violations in relation to a proposed merger between Inphi and semiconductor company Marvell Technology Group Ltd.

According to the complaint, on October 29, 2020, Inphi entered into a merger agreement with Marvell, Holdco, Bermuda Merger Sub, and Delaware Merger Sub, under which, “(i) Bermuda Merger Sub will be merged with and into Marvell, with Marvell continuing as a wholly-owned subsidiary of HoldCo; and (ii) Delaware Merger Sub will be merged with and into Inphi, with Inphi continuing as a wholly-owned subsidiary of Holdco.” Pursuant to the merger agreement, as merger consideration, “each share of Inphi common stock will be converted into the right to receive: (i) $66.00 in cash; (ii) 2.323 shares of HoldCo common stock.” The plaintiff claimed that in December, in order to persuade Inphi shareholders to vote in favor of the proposed transaction, the defendants allegedly filed a materially incomplete and misleading Form S-4 Registration Statement with the Securities and Exchange Commission (SEC), in violation of the Exchange Act. Specifically, the plaintiff averred that the registration statement was materially incomplete and misleading, as it pertained to “(i) the financial projection prepared by Inphi management; and (ii) the valuation performed by the Company’s financial advisor, Qatalyst Partners LP.”

For example, the defendants allegedly included the “‘Inphi Projections’ and the ‘Pro Forma Financial Information’ projections prepared by management, while excluding Net Income projections for Inphi and the Pro Forma Combined Company (‘Net Income Projections’), despite references to Net Income for both throughout the Registration Statement.” Thus, according to the plaintiff, because of the omissions, the registration statement is materially incomplete and “provide(s) a misleading valuation picture of Inphi and the Pro Forma Combined Company.” Additionally, the registration statement purportedly omits information about Qatalyst Partners’ financial analyses for the proposed transaction, such as noting in the registration statement that Qatalyst Partners used “the ‘Analyst Projections’ in performing its financial analyses,” but failing to disclose the analyst projections it used. Furthermore, the plaintiff contended that the registration statement also does not include other projections it referenced for analysis, such as the adjusted Marvell projections. Thus, the plaintiff argued the registration statement and various analyses are incomplete and misleading because of these omissions.

The defendants are accused of violating Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9, as well as breaching their fiduciary duty of candor/disclosure under state law.

The plaintiff has sought to preliminarily enjoin the defendants from proceeding with the shareholder vote or consummating the proposed transaction, unless and until the company discloses the Registration Statement omissions; an accounting of all damages; an award for costs and fees; and other relief. The plaintiff is represented by Monteverde & Associates PC.

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