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Borland acquisition now in doubt

By David Worthington

June 9, 2009 — Micro Focus' bid to acquire Borland Software is not a done deal. Filings with the U.S. Securities and Exchange Commission reveal that a counter proposal could be in the works, and in a separate action, a law firm is soliciting disaffected shareholders for a class action against the company's board of directors.

On June 1, Borland filed a proxy with the SEC notifying shareholders that an unnamed company, referred to as "Company E," had contacted Borland president Erik Prusch on May 21, expressing interest in making an acquisition proposal.

The following day, Borland received a letter indicating an interest in acquiring 100% of its common stock for an offer price of US$1.20 per share in cash, financed through equity capital from an affiliate of the buyer, according to the SEC filing.

Borland's board mulled over the proposal in a May 24 conference call; representatives of DLA Piper and J.P. Morgan were present on the call. The banks are serving as advisors to Borland in the transaction.

On May 6, Micro Focus and Borland announced that the companies had entered into a merger agreement, with Micro Focus, agreeing to pay $1.00 per share, which represents a 67% premium over the average 30-day closing price of $0.60, according to Micro Focus.

The transaction is valued at $75 million and must be approved by Borland's shareholders. The company must pay Micro Focus $3 million if shareholders refuse to approve the transaction, which has been endorsed by its board.

Institutional investors hold the majority of Borland shares, and hedge fund S Squared Technology is the largest shareholder.

Borland notified Micro Focus of the counter bid per its obligations under the agreement. Borland entered a nondisclosure agreement with Company E on May 28, and it has granted it access to its data room.

Meanwhile, Levi & Korsinsky, a New York-based law firm, has begun to solicit Borland shareholders to join a securities litigation class action lawsuit against Borland's board of directors. The lawsuit is being advertised via Google Adwords.

Solicitation is regulated by the jurisdiction in which the firm operates. Under New York state law, solicitation by law firms is permitted as long as there was a party in interest to lead the class who was not solicited.

The lawsuit is investigating whether Borland's board had breached its fiduciary duty and state laws by selling the company for $1.00 per share. It is also contesting a "no-ship" provision contained within the merger agreement that prevents Borland from "soliciting, initiating, or even encouraging or facilitating any acquisition proposal from any third party," according to the firm's press release.

Levi & Korsinsky partner Juan Monteverde refused to comment other than to say, "We don't litigate in the press; that is what we have courtrooms for."

Borland spokesperson Leah Bibbo refused to comment.

Related Search Term(s): Borland, Micro Focus

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Zeichick’s Take: Micro Focus acquisition is the end of the line for Borland
Borland will not be terribly missed, as its best products have already been acquired by Embarcadero. Micro Focus will be a better steward of what is left of Borland Read More...

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