On Tuesday, Alaska Communications Systems Group, Inc., “the leading provider of advanced broadband and managed IT services for businesses and consumers in Alaska,” and several members of the Board of Directors were sued in the Eastern District of Pennsylvania by common stockholder Dennis Palkon for purported securities violations in relation to its proposed merger.
According to the complaint, on December 31, 2020, the Board had Alaska Communications Systems Group, Inc. enter into an agreement and plan for a merger under which Alaska Communications would be acquired by Project 8 Buyer, LLC (Parent) and Project 8 MergerSub, Inc. (MergerSub), which are affiliates of ATN International, Inc.; this is referred to as the Proposed Transaction. The plaintiff stated that under the Merger Agreement terms, “Alaska shareholders will receive $3.40 per share in cash.” The plaintiff claimed that on January 25, 2021, the defendants filed a proxy statement with the Securities and Exchange Commission (SEC), which allegedly omits material information about the Proposed Transaction in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act).
For example, the statement allegedly failed to disclose material information about Alaska Communications’ financial projections. The plaintiff contended that the disclosure of this information is important because it “provides stockholders with a basis to project the future financial performance of a company” and “allows stockholders to better understand the financial analyses performed by the company’s financial advisor in support of its fairness opinion.” Specifically, the proxy statement allegedly failed to disclose “the line items used to calculate adjusted EBITDA and adjusted free cash flow” and “a reconciliation of the non-GAAP to GAAP metrics.”
The plaintiff added that the statement also failed to disclose material information about the financial analyses performed by Alaska Communications’ financial advisor. Moreover, the plaintiff asserted that the Proxy does not disclose material information about the financial advisor’s potential conflicts of interest. As a result, the plaintiff contended that these omissions make the Proxy false and misleading because stockholders do not have the necessary information to make an informed decision, thus if the omissions are disclosed it “would significantly alter the total mix of information available to Alaska’s stockholders.”
The defendants are accused of violating Sections 14(a) and 20(a) of the Exchange Act. The plaintiff has sought to enjoin the defendants from proceeding with, consummating, or closing the Proposed Transaction, but in the event that the defendants consummate the Proposed Transaction, to rescind it, set it aside, or award rescissory damages; for the defendants to file a Proxy without the omissions; declaratory judgment in its favor; an award for costs and fees; and other relief. The plaintiff is represented by RM Law, P.C.
This is one of four lawsuits filed against Alaska Communications Systems Group for securities violations arising from the transaction, just three days into the month. The suits generally parallel the complaint filed by Palkon.