SAN JOSE, Calif. (Legal Newsline) – In a case stemming from the merger of McAfee and Intel and allegations of undervalued stock, a California appellate court recently affirmed the ruling dismissing the individual defendants but reversed the lower court as to the corporate defendants. David DeWalt, McAfee Inc., and Intel Corp. are still in the case.
In coming to its decision, the 6th Appellate District Court of Appeal noted that the plaintiff raised triable issues related to DeWalt's apparent nondisclosure of information about has raised one or more triable issues of material fact related to DeWalt's apparent nondisclosure of arguably material information about senior vice president Renee James' $50-per-share overture.
"Even if the evidence at the time that Intel made its revised offer at $48 per share showed that it was Intel's best and final offer... conflicting inferences emerge as to why DeWalt did not mention James' probing inquiry two weeks earlier," the Nov. 15 opinion says.
"DeWalt bears the burden under the enhanced scrutiny standard of review to show that he exercised his fiduciary duties in furtherance of the obligation 'to secure the transaction offering the best value reasonably available for the stockholders.'"
The plaintiff in the matter is the Central Laborer’s Pension Fund on behalf of itself and a class. It alleged that the board of directors of McAfee withheld crucial information and thus the stock was undervalued at $48 a share.
Specifically, according to the appellate decision, “Plaintiff claims that in pursuit of his own self-interest, DeWalt withheld material information about negotiations with Intel management from McAfee’s board of directors, whose members failed to safeguard the process and who consequently approved an undervalued price per share. Plaintiff also claims that defendants omitted material information from the merger proxy statement on which McAfee’s public shareholders relied in voting for the merger.”
McAfee was founded in 1989 and has become a powerhouse in the Internet security field. In 2007, David DeWalt became its president and CEO, the opinion states.
In 2010, McAfee and Intel started the process of merging. On Nov. 2, 2010, after months of negotiation as to share price, 99.9 percent of McAfee’s shareholders approved the merger.
In January 2011, the complaint was filed. It alleged that material information was withheld from proxy statements and McAfee shareholders got flawed information.
Specifically, “The complaint in sum asserted that (1) defendants were motivated by lucrative personal gains, (2) the acquisition price of $48 per share was unfair and undervalued below McAfee management's own estimates, (3) the proxy statements to McAfee's public shareholders omitted material information about the merger process and the basis for Morgan Stanley's fairness analysis, and (4) defendants consequently breached their fiduciary obligation to obtain the highest value reasonably available for McAfee's shareholders,” according to the opinion.
The defendants moved for summary judgment in 2012, which the trial court granted. It found there was no liability on behalf of the individuals or the corporations.
The appellate court concluded that “based on the nature of the allegations and relief sought in this case, that the trial court properly treated the action as equitable in nature, to be tried by the court. The judgment is affirmed as to defendants Charles Robel, Carl Bass, Thomas Darcy, Leslie Denend, Jeffrey Miller, Lorrie Norrington, Denis O’Leary, Robert Pangia, and Anthony Zingale. The judgment is reversed as to defendants David DeWalt, McAfee Inc. and Intel Corp.,” the opinion states.
Justice Eugene Premo wrote the opinion.