Exhibit (a)(5)(F)
| SHIVA Y. STEIN, Individually and On Behalf |
) |
|||
| of Herself and All Others Similarly Situated, |
) |
IN THE CIRCUIT COURT | ||
| ) |
||||
| ) |
FOR | |||
| Plaintiff, |
) |
|||
| ) |
HOWARD COUNTY, MARYLAND | |||
| ) |
||||
| v. |
) |
|||
| ) |
Case No. 13C14099536 | |||
| MICROS SYSTEMS, INC., OC |
) |
|||
| ACQUISITION LLC, ROCKET |
) |
|||
| ACQUISITION CORPORATION, ORACLE |
) |
|||
| CORPORATION, PETER A. ALTABEF, |
) |
CLASS ACTION | ||
| LOUIS M. BROWN, JR., B. GARY DANDO, |
) |
|||
| A.L. GIANNOPOULOS, F. SUZANNE |
) |
|||
| JENNICHES, JOHN G. PUENTE, and |
) |
JURY TRIAL DEMANDED | ||
| DWIGHT S. TAYLOR, |
) |
|||
| ) |
||||
| ) |
||||
| ) |
||||
| ) |
||||
| Defendants. |
) |
|||
| ) |
||||
|
|
) |
AMENDED CLASS ACTION COMPLAINT
Plaintiff Shiva Y. Stein (“Plaintiff”), individually and on behalf of herself and all others similarly situated, by Plaintiffs attorneys, allege upon information and belief, except for those allegations that pertain to Plaintiff, which are alleged upon personal knowledge, as follows:
SUMMARY OF THE ACTION
1. Plaintiff brings this stockholder class action individually and on behalf of all other public stockholders of MICROS Systems, Inc. (“MICROS” or the “Company”) against the Company’s Board of Directors (the “Board” or the “Individual Defendants”), OC Acquisition LLC, Oracle Corporation (together with OC Acquisition LLC, “Oracle”), and Rocket Acquisition Corporation (“Merger Sub” and together with MICROS, the Board, and Oracle, the “Defendants”).
2. The action arises from breaches of fiduciary duties in connection with a proposed
transaction announced on June 23, 2014 in which Oracle will acquire MICROS, through a tender offer to be commenced by Merger Sub (the “Tender Offer”), for $68.00 in cash for each share of MICROS common stock (the “Merger Consideration”) for a total of approximately $5.3 billion or $4.6 billion net of cash (the “Proposed Transaction”). The Tender Offer commenced on July 3, 2014 and will expire on the twentieth business day following its commencement.
3. Oracle is attempting to acquire MICROS at a significant discount to the Company’s intrinsic value as evidenced by its recent financial success. For example, in its last quarter, the Company beat analysts’ net income estimates by 10% ($55 million versus estimates of $50 million) and earnings per share by 9% ($0.72 per share versus estimates of $0.66 per share). Moreover, MICROS has beat analysts’ comparable sales estimates in each of the last four quarters and recently increased its fiscal 2014 guidance, now stating that it will have revenue between $1.360 billion and $1.385 billion and non-generally accepted accounting principles (“GAAP”) earnings per share (“EPS”) between $2.53 to $2.57, up from revenue between $1.320 billion and $1.345 billion, and non GAAP EPS between $2.46 and $2.51.
4. It is no surprise that the Merger Consideration does not adequately reflect the true value of the Company given the inadequacy of the sales process conducted by the Board. Indeed, the Board never reached out to any potential third-party acquirers and even refused to engage with at least one financial bidder that had expressed serious interest in an acquisition at a price range that exceeded the Merger Consideration by almost 3%.
5. Knowing that the lack of a meaningful price and opportunistic timing of the Proposed Transaction would draw serious interest from other potential buyers, and in an effort to ensure that the Proposed Transaction is consummated, the Board agreed to include certain provisions that unreasonably inhibit potential third party bidders from launching topping bids in
2
the June 23, 2014 Agreement and Plan of Merger (“Merger Agreement”), including (i) a strict no-solicitation provision that severely constrains the Individual Defendants’ ability to communicate and negotiate with potential buyers who wish to submit or have submitted unsolicited alternative proposals; (ii) a four business day “matching rights” period; and (iii) a termination fee provision requiring the Company to pay $157,780,000 to Oracle in the event the Company receives a higher offer and enters into an alternative transaction. Notably, however, the Merger Agreement does not include a reverse termination fee in the event Oracle decides not to go through with the Proposed Transaction. These unreasonable terms virtually foreclose the possibility that an alternative bidder will emerge to acquire the Company.
6. Finally, on July 3, 2014, in support of the Proposed Transaction, MICROS filed a Schedule 14D9 Recommendation Statement (the “Recommendation Statement”) with the United States Securities and Exchange Commission (“SEC”). The Recommendation Statement fails to provide the Company’s stockholders with material information and/or provides them with materially misleading information concerning the unfair sales process that resulted in the Proposed Transaction, the financial valuation analyses prepared by the Company’s financial advisor, Centerview Partners LLC (“Centerview”), and the Company’s expected future financial performance. As a result, shareholders unable to make an informed decision as to whether to tender their shares in connection with the Proposed Transaction,
7. In facilitating the Proposed Transaction for inadequate consideration and through a flawed and self-serving sales process, each of the Defendants breached and/or aided the other Defendants’ breaches of their fiduciary duties. Accordingly, Plaintiff seeks to enjoin the closing of the Tender Offer unless and until Defendants remedy their fiduciary duty violations by engaging in a process designed to secure maximum value for MICROS shareholders and provide
3
those shareholders with all material information necessary to make a fully-informed decision whether to tender their shares to Oracle in the Tender Offer.
THE PARTIES
8. Plaintiff is and, at all times relevant hereto, has been a holder of MICROS common stock.
9. Defendant MICROS is a leading worldwide designer, manufacturer, marketer, and servicer of enterprise applications solutions for the global food and beverage, hotel and retail industries. It was incorporated in the State of Maryland in 1977 as Picos Manufacturing, Inc. and, in 1978, changed its name to MICROS. Its principal executive offices are located at 7031 Columbia Gateway Drive, Columbia, Maryland 21046-2289. As of June 25, 2014, MICROS had 74,817,363 shares issued and outstanding trading on the NASDAQ under the symbol “MCRS.”
10. Defendant Peter A. Altabef (“Altabef”) has been the Company’s President and Chief Executive Officer, and a member of the Company’s Board since January 2013.
11. Defendant Louis M. Brown, Jr. (“Brown”) has been a director of the Company since 1977. Brown previously served as President and CEO of the Company from January 1986 until his appointment as Chairman of the Board in January 1987. He served as Chairman of the Board until April 2001.
12. Defendant B. Gary Dando (“Dando”) has been a director of the Company since November 2003. Dando is Chairman of the Board’s Audit Committee.
13. Defendant A.L. Giannopoulos (“Giannopoulos”) has been the Company’s Chairman of the Board since April 2001 and a director of the Company since March 1992. Giannopoulos served as President and CEO of the Company from May 1993 to December 2012. Giannopoulos retired as a Company employee effective June 30, 2013.
4
14. Defendant F. Suzanne Jenniches (“Jenniches”) previously served on the Board from October 1996 to November 2003 and has been a director of the Company since November 2013. Jenniches is a member of the Board’s Audit Committee and Compensation and Nominating Committee.
15. Defendant John G. Puente (“Puente”) has been a director of the Company since May 1996. Puente is Chairman of the Board’s Compensation and Nominating Committee and a member of the Board’s Audit Committee.
16. Defendant Dwight S. Taylor (“Taylor”) has been a director of the Company since 1997. Taylor is a member of the Board’s Compensation and Nominating Committee.
17. Defendants Altabef, Brown, Dando, Giannopoulos, Jenniches, Puente, and Taylor are collectively referred to herein as the “Individual Defendants.”
18. The Individual Defendants, as officers and/or directors of MICROS, have a fiduciary relationship and responsibility to MICROS and its shareholders.
19. Defendant Oracle is a U.S.-based multinational computer technology corporation headquartered in 500 Oracle Parkway, Redwood City, California, 94065. It specializes in developing and marketing computer hardware systems and enterprise software products, particularly its own brands of database management systems.
20. Defendant OC Acquisition LLC is Delaware limited liability company and wholly owned subsidiary of Oracle. Upon completion of the Proposed Transaction, MICROS will become a wholly owned subsidiary of OC Acquisition LLC.
21. Defendant Merger Sub is a Maryland corporation. It is a direct subsidiary of OC Acquisition LLC and an indirect subsidiary of Oracle. Upon completion of the Proposed Transaction, Merger Sub will merge with and into MICROS and cease its separate corporate
5
existence.
JURISDICTION AND VENUE
22. This Court has jurisdiction over the Defendants because each Defendant is either a corporation that conducts business in and maintains operations in Howard County, or is an individual who has sufficient minimum contacts with Maryland so as to render the exercise of jurisdiction by the Maryland courts permissible under traditional notions of fair play and substantial justice.
23. Venue is proper in this Court because MICROS is incorporated in Maryland and regularly transacts business in Howard County, Maryland, and there are multiple defendants with no single venue applicable, and thus can be sued in any Maryland county.
CLASS ACTION ALLEGATIONS
24. Plaintiff brings this action as a class action individually and on behalf of all holders of MICROS common stock, who are being and will be harmed by the Individual Defendants’ actions, described herein (“Class”). Excluded from the Class are Defendants and any person, firm, trust, corporation or other entity related to or affiliated with any Defendant.
25. This action is properly maintainable as a class action because:
a. The Class is so numerous that joinder of all members is impracticable. As of June 25, 2014 MICROS had 74,817,363 shares issued and outstanding. The actual number of public shareholders of MICROS will be ascertained through discovery. Moreover, the holders of these shares are geographically dispersed throughout the United States;
b. There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual Class member. These common questions include: (i) whether the Individual Defendants have engaged in self-dealing, to the detriment of
6
MICROS’ public shareholders; (ii) whether the Proposed Transaction is unfair to the Class, in that the price is inadequate and is not the fair value that could be obtained under the circumstances; (iii) whether Oracle aided and abetted the Individual Defendants’ breaches of fiduciary duty; and (iv) whether the Class is entitled to injunctive relief as a result of the wrongful conduct committed by Defendants;
c. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff’s claims are typical of the claims of the other members of the Class and Plaintiff have the same interests as the other members of the Class. Accordingly, Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class;
d. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for Defendants, or adjudications with respect to individual members of the Class which would, as a practical matter, be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; and
e. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate.
THE FLAWED AND SELF-SERVING SALES PROCESS
26. MICROS is a worldwide provider of leading enterprise-wide applications, services, and hardware for the hospitality and retail industries. By combining its industry knowledge and expertise to provide cloud-based, mobile, and on premise solutions that allow its
7
clients to streamline operations and successfully engage their customers the Company has been able to expand to the point that its products and services are now in use at over 567,000 hotels, casinos, table and quick service restaurants, retail, leisure and entertainment, fuel and convenience, cruise, and travel operations in more than 180 countries, and on all seven continents.
27. Despite its recent growth and market position, the Individual Defendants inexplicably decided to sell the Company to Oracle following a short three-month (and essentially single-bidder) sales process which began in late March of 2014 when Oracle first contacted the Company to discuss a potential acquisition.
28. Without Oracle having even made any proposal whatsoever, and prior to the Board even being informed of Oracle’s interest, Company management reached out to Centerview to assist it in analyzing the Oracle inquiry.
29. Throughout April and into early May of 2014, Company management negotiated and entered into a non-disclosure agreement with Oracle and allowed it access to various due diligence materials. At no point during this period was a full meeting of the Board held to discuss Oracle’s interest in acquiring the Company or to evaluate the best process for maximizing shareholder value in connection with a potential transaction,
30. On May 28, 2014, Oracle submitted a non-binding proposed to acquire the Company for $64.25 per share (the “Initial Proposal”). The Initial Proposal further requested that MICROS enter into an exclusivity agreement.
31. Following its June 2, 2014 meeting, the Board determined that the Initial Proposal was insufficient and that only a price in the low-to-mid $70’s per share would justify an exclusivity agreement. Despite the inadequacy of the Initial Proposal, the Board inexplicably
8
decided not to solicit the interests of potential third-party bidders (including Party A) due to its unfounded belief that “Oracle would be the party most likely to pay the highest price.”
32. Two days later, on June 4, 2014, Oracle increased its offer to $67.25 per share. The Company told Oracle this time that instead of a low-to-mid $70’s offer before the Board would be willing to enter into exclusive negotiations, its offer would need to be increased to $70 per share in cash before the Board would be prepared to enter into exclusive negotiations.
33. Finally, on June 5, 2014, Oracle increased its offer to $68 per share and reiterated its request for exclusivity. The Board subsequently authorized the Company to enter into exclusive negotiations with Oracle, without bothering to contact any other potential bidders and without bothering to negotiate a per share price of at least $70 as it had previously insisted.
34. During the course of the exclusivity period, the Company was contacted by a financial sponsor referred to in the Recommendation Statement as “Party B” on no less than three occasions to discuss a potential all-cash transaction to acquire MICROS for between $67 and $70 per share – up to $2.00 per share more than the Merger Consideration. These overtures were ignored by the Board and its advisors in accordance with the exclusivity agreement the Company had entered into with Oracle.
35. The Board was well aware of Party B’s interest in the Company, having entered into a non-disclosure agreement with Party B just two weeks earlier on May 22, 2014, yet Party B was never informed that MICROS had entered into exclusive discussions with Oracle nor were they advised that any potential proposal should be made on an expedited basis.
36. Despite Party B’s offer, the Board failed in its duties to maximize shareholder value and continued to drive toward a non-value maximizing transaction with Oracle. Indeed, with no competition, Oracle and the Board promptly reached an agreement without negotiating a
9
go-shop period and/or a lower termination fee that would allow it to follow-up with Party B on its interest in the Company.
37. On the morning of June 23, 2014 – prior to the expiration of the exclusivity period – MICROS issued a press release announcing the Proposed Transaction. On July 3, 2014, Oracle commenced the Tender Offer.
38. By not engaging in an outward sales process and unfairly limiting the ability of Party B, or any third-party bidder, to make a competing proposal to acquire the Company, the Individual Defendants were able to ensure they would receive the personal financial benefits for which they had negotiated in connection with the Proposed Transaction.
39. While MICROS’ public stockholders are being cashed out for the inadequate Merger Consideration and foreclosed from participating in the future growth of the Company, the Individual Defendants and certain other members of MICROS’ management team will receive more than $20 million in cash in exchange for their more than 308,000 shares of Company stock. This is in addition to the millions of dollars in potential payments to which they may be entitled as evidenced in the following chart:
| Named Executive Officers |
Cash Payments, Equity and Benefits | |||
| Peter A. Altabef |
$ | 9,710,106 | ||
| Thomas L. Patz |
$ | 9,726,335 | ||
| Cynthia A. Russo |
$ | 4,764,749 | ||
| Kaweh Niroomand |
$ | 7,933,760 | ||
Indeed, Defendant Altabef alone stands to receive more than $14 million upon completion of the Proposed Transaction.
40. As evidenced by the foregoing, MICROS’ directors and officers have acted in
10
their own interests in entering into the Proposed Transaction and to the detriment of the Company shareholders they are duty-bound to serve – a direct violation of their fiduciary duties.
THE PROPOSED TRANSACTION
41. On June 23, 2014, MICROS issued a press release announcing the Proposed Transaction pursuant to which Oracle will acquire the Company in a $68 per share Tender Offer. The press release stated, in relevant part, as follows:
MICROS Systems, Inc. (NASDAQ:MCRS), a provider of information technology solutions for the hospitality and retail industries, today announced that it has entered into a definitive agreement to be acquired by Oracle. Under the terms of the agreement, MICROS stockholders will receive $68.00 in cash for each share of common stock they hold. The purchase price represents a fully-diluted equity value of approximately $5.3 billion, or $4.6 billion net of cash.
The Board of Directors of MICROS has unanimously approved the transaction. The transaction is expected to close in the second half of 2014, subject to MICROS stockholders tendering a majority of MICROS’ outstanding shares and shares representing vested equity incentive awards in the tender offer, certain regulatory approvals and other customary closing conditions.
42. The following day, the Company filed a Current Report on Form 8-K with the SEC wherein it disclosed the Merger Agreement. Knowing that the opportunistic timing of the Proposed Transaction would draw serious interest from other potential buyers – particularly Party B that had previously been spurned by the Board – the Individual Defendants agreed to a number of draconian deal protection devices in the Merger Agreement that were designed to preclude any competing bids for MICROS from emerging in the period following the announcement of the Proposed Transaction, including:
a. a no-solicitation clause preventing MICROS and any of its representatives from soliciting, or its directors and officers from even participating in discussions which may lead to, an Acquisition Proposal (which mainly includes any transaction pursuant to which any third party acquires, directly or indirectly, any assets of MICROS or MICROS’s subsidiaries
11
representing, in the aggregate, fifteen percent (15%) or more of the assets of MICROS and MICROS’ subsidiaries on a consolidated basis, or any tender offer or exchange offer that, if consummated, would result in any third party beneficially owning fifteen percent (15%) or more of any class of equity securities of MICROS or MICROS’s subsidiaries) from any bidder other than Oracle (Merger Agreement, Section 7.03);
b. a four (4) business days ‘matching right’ which allows Oracle to propose revisions to the terms of the Merger Agreement or make other proposals and requires the Board to negotiate in good faith with Oracle before accepting a Superior Proposal or making a change in their recommendation of the Proposed Merger (Merger Agreement, Section 7.03(e)); and
c. a termination fee of $157,780,000 (or 3.1% of the Proposed Transaction’s total equity value) to be paid by MICROS to Oracle in the event that the Proposed Merger is not consummated (Merger Agreement, Section 10.04(b)) with no corresponding reverse termination fee in the event Oracle decides not to go through with the Proposed Transaction, thus serving as a boon for Oracle, rather than making it whole should the Proposed Transaction not go through.
43. Moreover, pursuant to Section 2.03 of the Merger Agreement, the Individual Defendants have granted Oracle a top-up option which ensures that the necessary amount of shares to consummate the Tender Offer will be obtained. More specifically. Section 2.03(a) provides:
The Company hereby grants to Parent and Merger Subsidiary an irrevocable option (the “Top-Up Option”), exercisable upon the terms and conditions set forth in this Section 2.03, to purchase from the Company the number of newly-issued, fully paid and non-asses sable shares of Company Common Stock (the “ Top-Up Shares”) equal to the lesser of: (i) the number of shares of Company Common Stock that, when added to the number of shares of Company Common Stock owned directly or indirectly by Ultimate Parent, Parent and Merger Subsidiary at the time of exercise of the Top-Up Option, constitutes 90% of the number of shares of Company Common Stock that would be outstanding on a fully-diluted basis immediately after talcing into account the issuance of all shares
12
of Company Common Stock subject to the Top-Up Option; or (ii) the aggregate number of shares of Company Common Stock that the Company is authorized to issue under its articles of incorporation but that are not issued and outstanding (and are not subscribed for or otherwise committed to be issued or reserved for issuance) at the time of exercise of the Top-Up Option.
44. Making matters worse, certain stockholders, including the Individual Defendants and Company insiders, have entered into Tender and Support Agreements, thereby ensuring that over 2.8 million Company shares (or approximately 3.8% of the total of all shares outstanding) are tendered to Oracle in connection with the Proposed Transaction.
45. Collectively, the foregoing deal protection devices foreclose the possibility that a third-party “white knight” may step forward to provide MICROS shareholders with a premium for their shares, leaving MICROS shareholders with the inadequate Merger Consideration offered by Oracle. Without any competing offers, the Individual Defendants (and certain other officers of MICROS) are all but guaranteed the personal benefits for which they unfairly negotiated with Oracle.
46. In other words, the Individual Defendants efforts to put their own personal interests ahead of the Company’s shareholders has resulted in the Proposed Transaction being presented at an untenable and inadequate price that, arguably, cannot be topped by a competing bidder.
THE INADEQUATE MERGER CONSIDERATION
The Company’s Recent Success and Future Growth
47. The Merger Consideration offered in the Proposed Transaction is inadequate in light of the Company’s recent financial performance and bright future.
48. MICROS has experienced growth in the double-digit range for the past three years and its growth is expected to continue as restaurants incorporate new technology. Indeed, a 2013 survey by the National Restaurant Association found that “[m]ore than half of fine-dining
13
operators plan to spend more on customer-facing technology such as mobile applications this year, with half of casual-dining operators and 40 percent of family-dining establishments anticipated to do the same.”1 Further, Dave Grimm, founding partner of G4Technologies stated: “[the restaurant industry is] still a very untapped market… [that’s set to change as] technology is such a part of everyone’s lives, people are going to wonder how they ever ran a restaurant without it.”2
49. Also underscoring the Company’s positioning for long-term growth, in its October 24, 2013 press release announcing its first quarter (“1Q”) 2014 financial results, the Company reported revenue of $314.7 million - an over 5.0% increase from the 1Q 2013 and record revenue for a first fiscal quarter. Commenting on the successful quarter, Defendant Altabef stated: “[w]e are pleased with our revenue growth in this environment, with especially strong growth in the United States and Canada.”
50. The Company continued to grow in the second quarter (“2Q”) of 2014. On January 30, 2014, the Company reported quarterly revenue of $345.6 million, a $21.0 million, or 6.5%, increase versus the 2Q 2013 – a quarterly revenue Company record. The Company also announced its GAAP diluted EPS for the quarter was $0.57 per share, a 5.6% increase over the 2Q 2013. In the press release, Defendant Altabef commented: “[w]e are pleased to achieve another quarter of strong revenue growth. We are encouraged by the improving demand
| 1 | http://www.bloomberg.com/news/2014-06-23/oracle-puts-micros-on-menu-as-restaurants-eat-up-software.html (last accessed on 7/7/2014). |
| 2 | Id. |
14
environment in our geographic regions and vertical markets.”
51. In the January 30, 2014 press release discussing the 2Q financials, MICROS also updated its financial guidance for fiscal 2014, increasing its August 2013 ranges for revenue from $1.295-$1.320 billion to as high as $1.345 billion and its ranges for Non-GAAP EPS from $2.46-$2.50 to as high as $2.51.
52. Continuing the positive news for stockholders, on May 1, 2014, the Company announced its results for the 3Q fiscal 2014, including record quarterly revenue, net income and EPS (GAAP and Non-GAAP). Specifically, among other things, for the 3Q 2014 MICROS reported revenue of $349.0 million, a $33.9 million or 10.7% increase versus the 3Q 2013; GAAP net income of $50.3 million, a $5 million or 13.6% increase versus the 3Q 2013; and GAAP diluted EPS of $0.66 per share, a $0.11 or 20.0% increase versus the 3Q 2013. This resulted in the Company again updating its fiscal 2014 financial guidance for revenue to as high as $1.385 billion and Non-GAAP EPS up to $2.57.
53. The Company’s success and future growth is further highlighted by its impressive portfolio of clients which includes luxury hotel operators such as Hyatt, Hilton, and Marriott; fast food and quick service restaurant owners such as Yum! Brands and Burger King; and retailers such as Lululemon, Adidas and IKEA. This is in addition to a bevy of new clients the Company has recently announced who are expected to contribute to the Company’s ongoing financial success including, most notably:
| • | Ovation Brands, the operator of Old Country Buffet, HomeTown, Buffet and Ryan’s brands, which selected MICROS cloud-based Simphony along with MICROS iCare Gift and Loyalty solution for all of its 337 locations (announced on May 13, 2014); and |
| • | Louvre Hotels Group, which has decided to replaced its legacy reservation system in more than 220 of its Tulip branded hotels (Tulip Inn, Golden Tulip and Royal Tulip) with the MICROS OPERA 9 Reservation System (ORS) (announced on |
15
| June 20, 2014). |
54. All of the foregoing has resulted in investors taking notice. According to an article published on thestreet.com on June 27, 2014:
Micros System will likely continue growing as, according to the National Restaurant Association, fine, casual and family dining restaurants are expected to increase their technology spending. Meanwhile, the point of sale software market could grow by more than 3% this year, as per Ibisworld’s estimates.3
55. Given the Company’s prospects for growth, the Proposed Transaction will deprive MICROS’ stockholders from sharing in the benefits of the Company’s recent success and bright future.
Investor and Analyst Criticism of the Proposed Transaction
56. In light of the above, it is no surprise that thestreet.com has been critical of the Proposed Transaction. According to businessweek.com, the premium being offer to MICROS shareholders in the Proposed. Transaction ranks among the lowest takeover premiums of the past four years.
Oracle yesterday said it agreed to buy Columbia, Maryland-based Micros in a transaction valued at $4.6 billion, or 17 times Micros’ earnings before interest, taxes, depreciation and amortization. That compares with a median multiple of 22 for Internet and software acquisitions, according to data compiled by Bloomberg. The 20 percent premium being offered to Micros shareholders also ranks among the tower takeover premiums of the past four years, the data show.4
57. To make matters worse, the Merger Consideration fails to account for the massive
| 3 | http://www.thestreet.com/story/12755380/1/micros-buy-can-revive-oracles-growth-and-its-just-a-beginning.html (06/27/2014). |
| 4 | http://www.businessweek.com/news/2014-06-23/oracle-eschews-flash-to-buy-micros-at-discount-real-m-and-a (last accessed on 6/26/2014) (emphasis added). |
16
benefits Oracle will receive through the Proposed Transaction. According to the press release announcing the Proposed Transaction, the deal will be “immediately accretive to Oracle’s earnings on a non-GAAP basis and to expand over time.” This same sentiment was reiterated in the June 27, 2014 article on thestreet.com which states that:
[T]his acquisition can expand Oracle’s foothold in the hospitality and retail sectors, opening doors to a new income stream that will generate recurring revenues from software maintenance. The acquisition will also allow Oracle to grow its revenue from its hardware unit.5
58. Ultimately, the Individual Defendants’ failure to reject the inadequate Merger Consideration evidences their disregard for ensuring that MICROS’ stockholders receive adequate value for their stock. By agreeing to the Proposed Transaction, the Individual Defendants have artificially depressed the value of MICROS’ stock, thereby depriving Plaintiff and the Class of the right and opportunity to receive the maximum value for their shares.
THE RECOMMENDATION STATEMENT OMITS MATERIAL INFORMATION
59. Compounding the unfair process and inadequacy of the Merger Consideration, on July 3, 2014, the Company filed the false and materially misleading Recommendation Statement with the SEC and disseminated it to MICROS’ shareholders. Designed to convince stockholders to tender their shares to Oracle in the Tender Offer, the Recommendation Statement fails to provide Company stockholders with critical information concerning the unfair sales process that resulted in the Proposed Transaction, the financial valuation analyses prepared by Centerview in connection with the rendering of its fairness opinion, and the Company’s expected future value as
| 5 | http://www.thestreet.com/story/12755380/1/micros-buy-can-revive-oracles-growth-and-its-just-a-beginning.html (last accessed on 6/27/2014). |
17
a standalone entity as evidenced by the Company’s financial projections.
60. Specifically, the Recommendation Statement fails to provide MICROS stockholders with the following material information (or provides them with materially misleading information), the absence of which renders them unable to make an informed decision as to whether to tender their shares to Oracle:
Material Omissions Concerning the Flawed Sales Process
61. The Individual Defendants fail to disclose material information relating to, among other things, the process leading up to the Proposed Transaction:
a. The Recommendation Statement states that “the board and senior management of the Company have, from time to time, discussed the Company’s long-term strategic alternatives, including potential strategic acquisitions and divestitures and other business combinations” but does not disclose what these strategic alternatives were;
b. whether Party A reached out to the Company or whether it was the Company who reached out to Party A in late 2012;
c. whether the Company ever made a counter-offer to Party A or attempted to contact Party A after it determined that its proposal was insufficient and discussions broke down in September 2013;
d. the reasons Party A discontinued discussions with the Company in September 2013;
e. what representative of the Company was contacted by Oracle in late March 2014 regarding a potential acquisition and whether that meeting ever took place;
f. whether Centerview was engaged as the Company’s financial advisor or whether the Board authorized senior management to solicit Centerview’s assistance on or around late
18
March of 2014;
g. why Centerview or any other financial advisor’s assistance was not sought in connection with the Company’s discussions with Party A;
h. the various strategic and financial matters that Centerview advised the Company on since early 2013 and the amount of any compensation received by Centerview for such services;
i. who the Company representative was that received the April 7, 2014 telephone call from Oracle and whether an offer was made to acquire the Company during that call (and if so the terms of such offer);
j. who the members of senior management and the Board were that engaged in the informal discussions concerning Oracle’s interest in acquiring the Company in early April of 2014;
k. the Company representative who was contacted by Party B on May 15, 2014;
1. the identities of the potential acquirors discussed by the Board on June 2, 2014 that it determined would not likely pay more than Oracle to acquire the Company;
m. the basis for deciding that it would consider entering into exclusivity with Oracle upon receiving a proposal in the low-to-mid $70’s per share as of June 3, 2014;
n. which Company representatives met with Party B on June 4, 2014 and why the Company chose to continue communications with Party B and not Party A;
o. whether there were any other potential acquirors other than Oracle. Party A, and Party B that expressed an interest in buying MICROS and the details of such proposals, if any;
p. the terms of the standstill agreements entered into with the various parties, if any;
q. who the Company representative was that told Oracle its offer would need to be
19
increased to $70.00 per share in cash before the Board would be prepared to enter into exclusive negotiations;
r. the basis for the Board’s decision to lower its asking price from the low-to-mid $70’s per share to $68 per share prior to entering into the exclusivity agreement with Oracle;
s. why Party A and Party B or other acquirors were not contacted before the Board entered into an exclusivity agreement with Oracle;
t. whether the June 6, 2014 e-mail received from Party B was sent before or after the Company entered into the exclusivity agreement with Oracle;
u. whether the Company ever engaged in discussions with Party B after it had made a proposal to acquire the Company for $67.00 to $70.00 per share;
v. whether discussions regarding retention of the Company’s directors and officers took place during the course of negotiations over the Proposed Transaction, and, if so, the parties that were involved in the negotiations; and
w. the specific terms of the Individual Defendants or management’s future employment with Oracle, if any.
Material Omissions Concerning Centerview’s Financial Valuation Analyses
62. The Recommendation Statement describes Centerview’s fairness opinion and the various valuation analyses it performed in support of its opinion. However, the description of Centerview’s fairness opinion and analyses fails to include key inputs and assumptions underlying these analyses. Without this information, as described below, Centerview’s public stockholders are unable to fully understand these analyses and, thus, are unable to determine what weight, if any, to place on Centerview’s fairness opinion in determining whether to tender their shares pursuant to the Tender Offer.
20
a. With respect to Centerview’s Discounted Cash Flow Analysis, the Registration Statement omits and/or materially misrepresents the following information:
i. the components necessary to calculate unlevered free cash flows (in particular, projected depreciation and amortization, stock based compensation, working capital requirements, and/or the projected tax rates);
ii. whether stock based compensation was treated as a cash expense;
iii. why the exit multiples used were lower than the multiples used in Centerview’s precedent transaction analysis; and
iv. the reason the perpetuity growth rate range begins at 2.0%.
b. With respect to Centerview’s Selected Publicly Traded Companies Analysis, the Registration Statement omits and/or materially misrepresents the following information:
i. the reason why revenue or EBITDA multiples were not considered;
ii. the individual multiples observed for each of the Companies selected by Centerview; and
iii. the reason why there is no control premium.
c. With respect to Centerview’s Precedent Transaction Analysis, the Registration Statement omits and/or materially misrepresents the following information:
i. the individual multiples observed for each of the transactions selected by Centerview in its analysis;
ii. the reason why the EV/EBITDA multiples reported by Centerview are lower than the multiples reported by Capital IQ; and
iii. whether the LTM EBITDA includes or excludes stock based compensation.
21
63. Finally, the Individual Defendants fail to disclose whether the $40 million net of valuation allowance in net operating loss (“NOL”) carryforwards possessed by MICROS were considered in any of Centerview’s financial valuation analyses and, if so, the extent to which they were so considered. As of June 30, 2013, the NOLs were approximately $40 million net of valuation allowance.
Material Omissions Concerning Management’s Financial Projections
64. The Recommendation Statement indicates that Centerview relied on projections that are different than those that were provided to Oracle. Centerview was provided 5 year projections whereas Oracle was provided future projections going out just 2 years. Additionally, the projections provided to Oracle reflect slightly higher revenue in 2014 and 2015 than those provided to Centerview. No reason was given why different projections were given to Oracle and Centerview, the underlying assumptions buttressing the two different sets of projections, and/or why the projections given to Oracle reflect higher revenue in 2014 and 2015.
65. While the Recommendation Statement discloses the projected unlevered free cash flows for the Company as calculated by management, it does not provide shareholders with the critical components used to calculate those figures, including the following amounts for the relevant periods:
a. Projected Depreciation and Amortization;
b. Working Capital Requirements;
c. Projected Tax Rate; and
d. Stock-Based Compensation.
66. As management’s financial projections provide shareholders with the Company’s inside view of a company’s long-term, standalone prospects and enable them to determine
22
whether they should cash in their shares for the Merger Consideration, it is critical that this information be disclosed prior to the Proposed Transaction being completed.
67. In short, the Proposed Transaction is wrongful, unfair, and harmful to MICROS’s public shareholders. Defendants, separately and together, are knowingly or recklessly violating their fiduciary duties and/or aiding and abetting such breaches, including their duties of loyalty, good faith, independence, candor, and full disclosure owed to Plaintiff and the Class. Indeed, the Merger Consideration is inadequate and the transaction itself is the result of a flawed sales process designed to improperly benefit the Individual Defendants. These problems are then masked by Defendants dissemination of the false and materially misleading Recommendation Statement. Accordingly, Plaintiff seeks injunctive and other equitable relief to prevent the irreparable injury that Company shareholders will continue to suffer if the Proposed Transaction is allowed to proceed.
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY
(AGAINST THE INDIVIDUAL DEFENDANTS)
68. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.
69. As alleged herein, Defendants have initiated a process to sell MICROS that undervalues the Company. In addition, by agreeing to the Proposed Transaction, Defendants have capped the price of MICROS at a price that does not adequately reflect the Company’s true value. Moreover, Defendants failed to sufficiently inform themselves of MICROS’ value, or disregarded the true value of the Company, in an effort to benefit themselves. Furthermore, any alternate acquirer will be faced with engaging in discussions with a management team and Board that is committed to the Proposed Transaction.
23
70. The Individual Defendants have violated fiduciary duties owed to public shareholders of MICROS, including but not limited to their fiduciary duties of candor and maximization of shareholder value owed by each of the Individual Defendants to Plaintiff and each of the other public shareholders of MICROS.
71. By the acts, transactions and courses of conduct alleged herein, the Individual Defendants have failed to maximize value for MICROS’ public shareholders.
72. As demonstrated by the allegations above, the Individual Defendants breached their fiduciary duties owed to the shareholders of MICROS because, among other reasons, they failed to take steps to maximize the value of MICROS to its public shareholders.
73. As a result of the actions of defendants, Plaintiff and the Class will suffer irreparable injury in that they have not and will not receive the highest available value for their equity interest in MICROS. Unless the Individual Defendants are enjoined by the Court, they will continue to breach their fiduciary duties owed to Plaintiff and the members of the Class, all to the irreparable harm of the members of the Class.
74. The Individual Defendants should take whatever action is necessary to cause MICROS to halt the Tender Offer.
75. Plaintiff and the members of the Class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury, which the Individual Defendants’ actions threaten to inflict.
24
SECOND CAUSE OF ACTION
AIDING AND ABETTING THE BOARD’S BREACHES OF FIDUCIARY DUTY
(AGAINST ORACLE AND MERGER SUB)
76. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.
77. Oracle and Merger Sub have acted and are acting with knowledge of or with reckless disregard to, the fact that the Individual Defendants are in breach of their fiduciary duties to the Company’s public shareholders, and have participated in such breaches of fiduciary duties.
78. Oracle and Merger Sub knowingly aided and abetted the Individual Defendants’ wrongdoing alleged herein. In so doing, Oracle and Merger Sub rendered substantial assistance in order to effectuate the Individual Defendants’ plan to consummate the Proposed Transaction in breach of their fiduciary duties.
79. Oracle and Merger Sub should take whatever action is necessary to halt the Tender Offer.
80. Plaintiff has no adequate remedy at law.
THIRD CAUSE OF ACTION
FOR DECLARATORY RELIEF PURSUANT TO COURTS
AND JUDICIAL PROCEEDINGS ARTICLE
OF THE ANNOTATED CODE OF MARYLAND § 3-401, ET SEQ.
(AGAINST ALL DEFENDANTS)
81. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.
82. Defendants breached their fiduciary duties in connection with the Proposed
25
Transaction, and/or aided and abetted such breaches, and are liable therefore.
83. As a result of Defendants’ conduct as herein alleged, Plaintiff and the other members of the Class have suffered and/or will, in the future, suffer damages and harm, including harm for which they have no adequate remedy at law.
84. Pursuant to Courts and Judicial Proceedings Article of the Annotated Code of Maryland §3-412, Plaintiff demands a declaration that: (a) shareholders should not be asked to tender their shares to Oracle in the Tender Offer, and that such Tender Offer should be enjoined; (b) Defendants and each of them have committed a gross abuse of trust and have breached their fiduciary duties owed to Plaintiff and the Class and/or have aided and abetted such breaches; (c) the Proposed Transaction was entered into in breach of Defendants’ fiduciary duties and was therefore unlawful and unenforceable, and that the Proposed Transaction or other agreements that Defendants entered into in connection with, or in furtherance of, the Proposed Transaction should be rescinded and invalidated; and (d) the Proposed Transaction, the Merger Agreement and/or the transactions contemplated thereby, should be rescinded and the parties restored to their original position.
FOURTH CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY OF DISCLOSURE
(AGAINST INDIVIDUAL DEFENDANTS)
85. Plaintiff incorporates each and every allegation above as if set forth in full herein.
86. The Individual Defendants have caused materially misleading and omissive information to be disseminated to the Company’s public stockholders.
87. The Individual Defendants have an obligation to be complete and accurate in their disclosures.
26
88. The Recommendation Statement fails to disclose material information, including financial information and information necessary to prevent the statements contained therein from being misleading.
89. Because of the Individual Defendants’ failure to provide full and fair disclosure, Plaintiff and the Class will be stripped of their ability to make an informed decision on whether to tender their shares in favor of the Proposed Transaction, and thus are damaged thereby.
90. Plaintiff and the Class have no adequate remedy at law.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands relief in Plaintiff’s favor and in favor of the Class, and against Defendants, as follows:
(a) Declaring that this action is properly maintainable as a class action, certifying Plaintiff as Class representatives and certifying her counsel as class counsel;
(b) Declaring that Defendants and each of them have committed a gross abuse of trust and have breached their fiduciary duties owed to Plaintiff and the Class and/or have aided and abetted such breaches;
(c) Declaring that the Proposed Transaction is the result of the Individual Defendants’ breaches of fiduciary duty, as aided and abetted by Oracle and Merger Sub, and is therefore unlawful and unenforceable;
(d) Rescinding, to the extent already implemented, the Merger Agreement and/or the Proposed Transaction;
(e) Enjoining Defendants, their agents, counsel, employees and all persons acting in concert with them from consummating the Proposed Transaction, unless and until the Company adopts and implements a procedure or process to obtain a merger agreement providing the best
27
possible value for shareholders and provides shareholders with all material information concerning the Proposed Transaction;
(f) Imposing a constructive trust, in favor of Plaintiff and the Class, upon any benefits, property, or value improperly received by Defendants and/or traceable thereto and/or in the possession of any of the Defendants as a result of their wrongful conduct;
(g) Awarding Plaintiff the costs and disbursements of this action, including reasonable attorneys’ and experts’ fees; and
(h) Granting such other and further equitable relief as this Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff and the Class demand a trial by jury as to all issues so triable.
Dated: July 9, 2014
| Respectfully submitted, | ||
| BROWER PIVEN | ||
| A Professional Corporation | ||
| ||
| Charles J. Piven | ||
| Yelena Trepetin | ||
| 1925 Old Valley Road | ||
| Stevenson, Maryland 21153 | ||
| T: (410) 332-0030 | ||
| F: (410) 685-1300 | ||
| Counsel for Plaintiff | ||
28
| OF COUNSEL: |
| POMERANTZ LLP |
| Gustavo F. Bruckner |
| Anna Karin F. Manalaysay |
| 600 Third Avenue |
| New York, New York 10016 |
| T: (212) 661-1100 |
| F: (917) 463-1044 |
| David Shaev |
| 1430 Broadway |
| Suite 1802 |
| New York, New York 10018 |
| T: (646) 722-8649 |
| F: (646) 349-7629 |
29
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 9th day of July 2014, copies of the Amended Class Action Complaint (with a comparison) will be served on the following parties via email where an email address is indicated (as per agreement of counsel) and U.S. mail for all others:
David Clarke, Jr.
DLA Piper LLP
500 Eighth Street, NW
Washington, DC 20004
david.clarke@dlapiper.com
MICROS Systems, Inc.
National Registered Agents, Inc. of MD
351 W. Camden Street
Baltimore, MD 21201
PETER A. ALTABEF
President and Chief Executive Officer
MICROS Systems, Inc.
7031 Columbia Gateway Drive
Columbia, MD 21046
LOUIS M. BROWN, JR.
c/o MICROS Systems, Inc.
7031 Columbia Gateway Drive
Columbia, MD 21046
B. GARY DANDO
7802 Stable Way
Potomac, MD 20854
A.L. GIANNOPOULOS
7031 Columbia Gateway Drive
Columbia, MD 21046
F. SUZANNE JENNICHES
5222 Harpers Farm Road
Columbia, MD 21044
JOHN G. PUENTE
c/o MICROS Systems, Inc.
7031 Columbia Gateway Drive
Columbia, MD 21046
30
| DWIGHT S. TAYLOR |
| 22 Stone Gate Court |
| Pikesville, MD 2128 |
|
| Yelena Trepetin |
31
