Delaware Chancellor Andre G. Bouchard has approved a $30.4 million settlement involving Tibco Software Inc.’s flawed $4.2 billion sale to Vista Equity Partners in 2014. The settlement resolves a claim that Tibco financial advisor Goldman Sachs Inc. damaged the class by informally conveying bid guidance to Vista after a share-counting error. Vista allegedly reduced its initial offer by $100 million based on the error.
The case had two key aspects: a reformation claim and an aiding and abetting claim. Chancellor Bouchard called the settlement an excellent outcome for the shareholders. The settlement included an agreement to limit the amounts available to Tibco’s former directors and officers, who were dropped along the way as Defendants and therefore eligible to share in any settlement. That change reduced the potential claim pool from $100 million to $91.7 million, with a roughly 33 percent settlement yielding a $30.4 million recovery. Most stockholders will receive about 19 cents per share extra as a result of the agreement.
The settlement terms limit distributions to those who submit claims, so that distributions will potentially be greater than 33 percent of the damage amount if some stockholders fail to submit forms. Tibco directors and officers will be limited to $439,251, or about 5 percent of the damage amount. Chancellor Bouchard said he was concerned that some stockholders would miss out on the compensation since the full amount will be distributed to those submitting claim forms after submission and verification deadlines. He added “I’m just worried that smaller shareholders may get shut out and the big boys will get more than they otherwise would have.”
The lawsuit was based on findings that Goldman “double counted” 4,147,144 shares of one category of Tibco common stock when preparing diligence materials for the bidders and its own fairness analysis. Vista initially offered $4.24 billion, expressed as a total cash amount at $24 per share based on the inflated count. When the count was corrected and reduced, the total offer fell, however, despite what class attorneys said was Vista’s clear purchase price intent. The following was stated in a settlement document filed in the case:
Plaintiff had no doubt that Goldman had mishandled the share count in the bidding process and had not come clean about these problems with the board, and that Vista had enjoyed an approximately $100 million windfall at Tibco stockholders’ expense.
The shareholders are represented by Stuart M. Grant and Cynthia A. Calder of Grant & Eisenhofer PA, Mark Lebovitch, David Wales, Edward G. Timlin and John Vielandi of Bernstein Litowitz Berger & Grossmann LLP, Francis Bottini Jr. of Bottini & Bottini Inc., and Juan E. Monteverde and James Wilson Jr. of Faruqi & Faruqi LLP.
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