Lawsuit to Block the Acquisition of Marketo by Vista Equity
A stockholder class action lawsuit was filed in Superior Court of the State of California, County of San Mateo against Marketo, the company’s Board of Director Directors, Vista Equity Partners Fund VI, L.P., Parent, and Merger Sub in order to hinder the proposed acquisition by Vista Equity Partners.
As CMS-Connected reported, Marketo Inc, a cloud marketing solutions platform provider, has announced an agreement to be acquired by the technology-focused private equity firm Vista Equity Partners in a cash deal valued at $1.79 billion. Under the terms of the proposed transaction, Marketo Inc. shareholders will receive $35.25 in cash per share which poses as a 9.5 percent premium to the closing price the day before the acquisition was declared. The issue was raised by the plaintiff that the price for shares is grossly inadequate and undervalues Marketo Inc. The reason behind this accusation is that Marketo Inc. reported its annual Total Revenue increased from $58.41 million in 2012 to $209.87 million in 2015, and the shares of Marketo Inc. reached as high as $42.68 per share in early 2014, which all means that the selling price is noticeably lower that the company's peak price. Moreover, Thomson First Call, the Consultant and Data Provider for The Wall Street Journal Best On The Street Analysts Survey, has set the highest current target price estimate at $55 while the lowest target price estimate stands at $22.
Therefore, the plaintiff alleges Marketo’s directors breached their fiduciary duties to Marketo stockholders not only due to agreeing to sell Marketo Inc. too cheaply but also going through an unfair process during the acquisition from the Marketo stockholders’ perspective. The lawsuit was filed on behalf of Sonila Porwal, a former Marketo database analyst who left the company in 2014, and all other public shareholders. Below, you may access to the full version of the lawsuit:
On the other hand, Margo M. Smith, Marketo's Senior Vice President and General Counsel, claimed the plaintiff’s allegations lack merit and noted that the company "will vigorously contest them." Besides, CEO Phil Fernandez sold 21,600 shares of his company's stock at an average price of $34.98, for a total value of $755,568 on Friday.
Many analyst firms, including JMP Securities, Bernstein, and JP Morgan, have recently downgraded Marketo's stock. We will shed light on what it means for Marketo’s stakeholders more in subsequent posts as events unfold.
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