-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OlG9ADugmlVS0Dt9vTuDPd1RsrkK7+zCLcr3o5pzD2d4hALaWboHTa77hSOeRaKC 2jSZSBxqyVk8OHL6n5wMcg== 0000356028-96-000013.txt : 19961111 0000356028-96-000013.hdr.sgml : 19961111 ACCESSION NUMBER: 0000356028-96-000013 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19961108 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CHEYENNE SOFTWARE INC CENTRAL INDEX KEY: 0000738830 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133175893 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-37554 FILM NUMBER: 96656915 BUSINESS ADDRESS: STREET 1: 3 EXPRESSWAY PLZ CITY: ROSLYN HEIGHTS STATE: NY ZIP: 11577 BUSINESS PHONE: 5164845110 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER ASSOCIATES INTERNATIONAL INC CENTRAL INDEX KEY: 0000356028 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 132857434 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: ONE COMPUTER ASSOCIATES PLAZA CITY: ISLANDIA STATE: NY ZIP: 11788 BUSINESS PHONE: 5163425224 SC 14D1/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - ----------------------------------------------------------------------- AMENDMENT NO. 4 TO SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 CHEYENNE SOFTWARE, INC. - ----------------------------------------------------------------------- (Name of Subject Company) TSE-TSEHESE-STAESTSE, INC. COMPUTER ASSOCIATES INTERNATIONAL, INC. - ----------------------------------------------------------------------- (Bidder) COMMON STOCK, PAR VALUE $.01 PER SHARE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS - ----------------------------------------------------------------------- (Title of Class of Securities) 166888107 - ----------------------------------------------------------------------- (CUSIP Number of Class of Securities) SANJAY KUMAR TSE-TSEHESE-STAESTSE, INC. C/O COMPUTER ASSOCIATES INTERNATIONAL, INC. ONE COMPUTER ASSOCIATES PLAZA ISLANDIA, NEW YORK 11788-7000 TELEPHONE: (516) 342-5224 - ----------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) COPIES TO: SCOTT F. SMITH, ESQ. HOWARD, DARBY & LEVIN 1330 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 TELEPHONE: (212) 841-1000 - ----------------------------------------------------------------------- OCTOBER 11, 1996 (Date Tender Offer First Published, Sent or Given to Security Holders) Page 1 of 4 Pages Exhibit Index begins on Page 4 2 Computer Associates International, Inc. and its wholly owned subsidiary, Tse-tsehese-staestse, Inc., hereby amend and supplement their Tender Offer Statement on Schedule 14D-1, originally filed on October 11, 1996 and amended by Amendment No. 1 filed on October 22, 1996, Amendment No. 2 filed on October 25, 1996 and Amendment No. 3 filed on November 4, 1996 (the "Statement"), with respect to an offer to purchase all outstanding shares of Common Stock, par value $.01 per share, including associated Preferred Share Purchase Rights, of Cheyenne Software, Inc. as set forth in this Amendment No. 4. Capitalized terms not defined in this Amendment No. 4 have the meanings assigned to them in the Statement. Item 10. Additional Information. The response to Item 10(e) is hereby supplemented as follows: On November 7, 1996, Computer Associates and the Company issued a joint press release announcing that the Court of Chancery of the State of Delaware denied a motion to preliminarily enjoin consummation of the Offer. The motion related to an amendment to a purported class action complaint originally filed against the Company and members of the Company's board of directors in April 1996. Copies of the joint press release and the Court of Chancery's memorandum opinion denying the motion are attached hereto as Exhibits (a)(13) and (a)(14), respectively, and are incorporated herein by reference. The amended complaint has been previously filed as Exhibit (a)(10) to the Statement and is incorporated herein by reference. The foregoing description is qualified in its entirety by reference to such exhibits. Item 11. Material to be Filed as Exhibits. (a)(13) Text of joint press release issued by Computer Associates and the Company dated November 7, 1996. (a)(14) Memorandum opinion issued November 7, 1996 by the Court of Chancery of the State of Delaware. 3 SIGNATURE After due inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: November 8, 1996 TSE-TSEHESE-STAESTSE, INC. By/s/ Peter Schwartz -------------------------------------- Name: Peter Schwartz Title: Vice President and Treasurer COMPUTER ASSOCIATES INTERNATIONAL, INC. By/s/ Peter Schwartz --------------------------------------- Name: Peter Schwartz Title: Senior Vice President and Chief Financial Officer 4 EXHIBIT INDEX Exhibit Number Exhibit Name - ------- ------------ (a)(13) Text of joint press release issued by Computer Associates and the Company dated November 7, 1996. (a)(14) Memorandum opinion issued November 7, 1996 by the Court of Chancery of the State of Delaware. EX-99.A.13 2 Exhibit 99 (a)(13) Contact: Doug Robinson Bob Gordon CA Investor Relations CA Public Relations (516) 342-2745 (516) 342-2391 dougr@mail.cai.com bobg@cai.com Elliot Levine - Cheyenne EVP/CFO (516) 465-4000 COMPUTER ASSOCIATES ANNOUNCES DELAWARE COURT HAS DENIED MOTION TO ENJOIN CONSUMMATION OF CHEYENNE TENDER OFFER ISLANDIA, NY and ROSLYN HEIGHTS, NY, November 7, 1996 - Computer Associates International, Inc. (NYSE: CA) and Cheyenne Software, Inc. (AMEX: CYE) announced today that the Delaware Chancery Court has denied a motion to preliminarily enjoin consummation of the tender offer by CA for all the outstanding shares of Cheyenne common stock, at a price of $30.50 per share. The motion was based on the alleged failure by Cheyenne and the members of its Board of Directors to disclose to shareholders certain financial information considered in connection with the tender offer. The offer is scheduled to expire at 12:00 midnight, New York City time, on Friday, November 8, 1996. Computer Associates International, Inc. (NYSE: CA), with headquarters in Islandia, NY, is the world leader in mission-critical software. The company develops, licenses, and supports more than 500 integrated products that include enterprise computing and information management, application development, manufacturing and financial applications. CA has 9000 people in 130 offices in 40 countries and had revenue of more than $3.5 billion in fiscal year 1996. CA can be reached by visiting http://www.cai.com on the World Wide Web, emailing info@cai.com, or calling 1-516-342-5224. Cheyenne Software, Inc. is an international developer of essential software solutions for NetWare, Windows NT, UNIX, Macintosh, OS/2, Windows 3.1 and Windows 95 operating systems. Its enterprise-wide offerings include an array of storage management, security, and communications products, including Cheyenne(r) HSM, JETserve(tm), InocuLAN(tm), FAXserve(tm), and its flagship product line, the ARCserve(r) family of network backup software. Cheyenne can be contacted at (800) 243-9462 (U.S. or Canada) or (516) 465-4000, or by visiting its WWW home page at: http://www.cheyenne.com. EX-99.A.14 3 Exhibit 99 (a)(14) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY IN RE CHEYENNE SOFTWARE, INC. ) CONSOLIDATED SHAREHOLDERS LITIGATION ) C.A. NO. 14941 MEMORANDUM OPINION ------------------ Date Submitted: November 6, 1996 Date Decided: November 7, 1996 Pamela S. Tikellis, Esquire, and James C. Strum, Esquire, of CHIMICLES, JACOBSEN & TIKELLIS, Wilmington, Delaware; and Joseph A. Rosenthal, Esquire, of ROSENTHAL MONHAIT GROSS & GODDESS, P.A., Wilmington, Delaware; OF COUNSEL: Stanley D. Bernstein, Esquire, of BERNSTEIN LIEBHARD & LIFSHITZ, New York, New York; Jon Plasse, Esquire, of GOODKIND LABATON RUDOFF & SUCHAROW, LLP, New York, New York; LAW OFFICES OF BERNARD M. GROSS, P.C., Philadelphia, Pennsylvania; LAW OFFICE OF DENNIS JOHNSON, S. Burlington, Vermont; KAUFMAN MALCHMAN KIRBY & SQUIRE, LLP, New York, New York; MALINA & WOLSON, New York, New York; SAVETT FRUTKIN PODELL & RYAN, P.C., Philadelphia, Pennsylvania; WECHSLER HARWOOD HALEBIAN & FEFFER, LLP, New York, New York; WOLF, HALDENSTEIN, ADLER, FREEMAN & HERZ, LLP, New York, New York; ZWERLING SCHACHTER ZERLING & KOPELL, New York, New York; Attorneys for Plaintiffs. Wayne N. Elliott, Esquire, James L. Holzman, Esquire, and Elizabeth M. McGeever, Esquire, of PRICKETT, JONES, ELLIOTT, KRISTOL & SCHNEE, Wilmington, Delaware, Attorneys for Defendant Computer Associates International, Inc. Kenneth J. Nachbar, Esquire, and Donna L. Culver, Esquire, of MORRIS, NICHOLS, ARSHT & TUNNELL, Wilmington, Delaware; OF COUNSEL: WACHTELL LIPTON ROSEN & KATZ, New York, New York, Attorneys for Defendants Reijane Huai, Rino Bergonzi, Richard F. Kramer, Bernard Rubien, Ginette Wachtel, and Cheyenne Software, Inc. CHANDLER, Vice Chancellor 2 Asserting breach of the fiduciary duties of due care and full disclosure by a target board of directors, shareholders seek to enjoin the closing of a tender offer that expires at midnight November 8. The all-cash, all-shares offer for $32.50 per share is at a substantial premium over the pre-offer market price. Finding no reasonable probability of success on the merits and concluding that the balance of hardships tips in defendants' favor, I deny the shareholders' application for injunctive relief. I. BACKGROUND In late 1995, Computer Associates International, Inc. ("Computer Associates") expressed an interest in acquiring Cheyenne Software, Inc. ("Cheyenne"). About the same time, Cheyenne's management decided that Cheyenne's long-term interests would be best served through an alliance with a larger company. To explore whether companies other than Computer Associates might also have an acquisition interest, Cheyenne, through an investment banking firm specializing in the technology sector, contacted seven other potential acquirors. None of these companies, however, expressed an interest in acquiring Cheyenne. In March 1996, Cheyenne's stock price dropped in one day, from $23 per share to $15 per share, in response to Cheyenne's announcement that its quarterly income would be less than expected. Shortly thereafter, McAfee Associates, Inc. ("McAfee") made an unsolicited stock-for-stock merger proposal. While the nominal value of the offer, based on the prevailing price of McAfee's stock, was $27.50, Cheyenne's Board of Directors believed that the merger would not be a good strategic fit and that McAfee's stock price would decline if the merger succeeded. Thus, Cheyenne's Board valued the McAfee offer at $24 per share and voted unanimously to reject the proposal. On April 16, plaintiffs filed a class action lawsuit against Cheyenne and its Board of Directors, alleging that they improperly rejected the McAfee proposal. When representatives of Cheyenne and Computer Associates met in June 1996 to discuss Cheyenne's possible sale, Computer Associates indicated that it would not pay more than the amount McAfee had offered. In September, however, Computer Associates offered $30 per share in cash. Cheyenne's Board discussed the offer with its legal and financial advisors, Lazard Freres & Co. LLC ("Lazard Freres") and Wachtell Lipton Rosen & Katz ("Wachtell Lipton"), and reached a preliminary conclusion that $30 per share or more in cash would be at fair offer to Cheyenne's shareholders. The Board did not make an attempt to contact other potential bidders because Cheyenne had previously contacted seven other potential acquirors in late 1995 and no other offer had developed since that time. The Board also believed that contacting further bidders might jeopardize the opportunity to sell Cheyenne to Computer Associates. During a meeting on October 6, 1996, Computer Associates raised its cash offer to $30.30 per share. After Cheyenne's Chairman, President and CEO, Reijane Huai, suggested $32.50 per share, Computer Associates lowered its bid to $28.50 per share. That afternoon, Cheyenne's Board consulted with Lazard Freres and Wachtell Lipton, and decided to reject the offer as inadequate. That evening, Computer Associates again offered $30.30 per share and indicated that it would publicly announce its offer the next day. 3 Cheyenne's stock was trading at $22. Fearing that a hostile tender offer by Computer Associates at $30.30 per share would succeed, and knowing that McAfee's $27.50 stock-for-stock proposal had been the only other offer available, Huai nonetheless decided to meet again with Computer Associates in a final attempt to improve the offer. Shortly after midnight, October 7, Computer Associates raised its offer to $30.50. This offer was unanimously approved by the Board after a ninety-minute meeting in the early hours of October 7, during which the Board was advised by Lazard Freres that the proposal was fair to Cheyenne's shareholders. Cheyenne's Board unanimously approved the final merger agreement that same day and the transaction was publicly announced. The agreement contained a "fiduciary out" permitting Cheyenne to receive higher unsolicited offers from third parties. It also contained a $37.5 million termination fee payable if Cheyenne's Board withdrew its approval of the merger or if Cheyenne were acquired by another party. On October 11, Computer Associates, through its subsidiary, commenced the offer to purchase and Cheyenne filed its 14D-9 recommending that Cheyenne shareholders tender their shares. On October 18, plaintiffs filed an amended class action complaint alleging that Cheyenne's Board failed to exercise due care and failed to disclose material information to Cheyenne shareholders in connection with Computer Associates' tender offer. On November 6, 1 heard oral argument on plaintiffs' motion for a preliminary injunction to enjoin the tender offer, which closes at midnight November 8. II. LEGAL STANDARD FOR A PRELIMINARY INJUNCTION The standard for a preliminary injunction consists of three separate elements. Plaintiffs must show (1) that the action has a reasonable probability of ultimate success on the merits, (2) that absent an injunction, plaintiffs will suffer immediate and irreparable harm, and (3) that the harm that would be suffered by plaintiffs if the injunction were to be granted outweighs the harm that would be suffered by defendants if the injunction were to be denied.1 III. ANALYSIS A. The Cheyenne Directors' Duty of Due Care Plaintiffs allege that Cheyenne's directors breached their fiduciary duty of due care by acting hastily and by failing to question the bases for Lazard Freres' use of a 21% discount rate in its cash flow analysis. The duty of care requires directors to act on an informed basis.2 Whether directors have acted on an informed basis depends upon "whether the directors have informed themselves 'prior to making a business decision, of all material information reasonably available to them'"3 Section 141(e) of Delaware's corporation law provides that directors are protected from a breach of the duty of due care when the directors reasonably believe the information upon which they rely has been presented by an expert "selected with reasonable care" and is within that person's "professional or expert competence." Furthermore, the decision of a board to accept or reject a tender offer is protected by the business judgment rule. Thus, to overcome the presumption that - ------------------------- 1 Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., Del. Supr., 506 A.2d 173, 179 (1986). 2 Cede & Co. v. Technicolor, Inc., Del. Supr., 634 A.2d 345, 367 (1993). 3 Smith v. Van Gorkom, Del. Supr., 488 A.2d 858 (1985), citing Kaplan v. Centex Corp., Del. Ch., 284 A.2d 119, 124 (1971). 4 the directors acted on an informed basis, plaintiffs must show that the Board acted with gross negligence.4 Plaintiffs have not established that their duty of care claim has a reasonable chance of ultimate success on the merits. Nothing in this record indicates that Lazard Freres was not selected with reasonable care or that the information they presented to the Board was not within their expert competence. Nor is there evidence that the Board failed to adequately examine the Lazard Freres' book that was reviewed by Mr. Rosenfeld, a managing director of Lazard Freres, with the Board on October 7. In that meeting, Mr. Rosenfeld explained the reasons behind Lazard Freres' use of a 21% discount rate as well as the impact that different discount rates would have upon the share price. Minutes of the Board meeting reveal that Mr. Rosenfeld discussed the strengths and weaknesses of four different share price ranges resulting from four different combinations of discount rates and growth rate projections provided by both Cheyenne management and computer industry analysts. Finally, there is no indication that the Board acted hastily. Cheyenne's Board had considered a sale or other business combination since late 1995. It had approached seven other potential bidders and retained two investment banks and legal counsel for advice. Finally, although the company was the subject of takeover rumors, McAfee and Computer Associates were the only companies to make a bid. In sum, plaintiffs have not shown a reasonable probability that they can prove the Board acted hastily or in an uninformed fashion. Thus, plaintiffs' duty of care claim fails to meet the first standard required for a preliminary injunction. B. The Cheyenne Directors' Duty to Fully Disclose Material Information A board of directors must fully and fairly disclose "all material facts within its control that would have a significant effect upon a stockholder vote."5 The board is not required to provide all available information, however, just that which a reasonable investor would view as "as having significantly altered the 'total mix' of information made available."6 The heart of plaintiffs' complaint is the allegation that Cheyenne's 14D-9 did not provide the reasons for Lazard Freres' use of a 21% discount rate and that such information would have significantly altered the "total mix" of information available by revealing to shareholders that Lazard Freres' opinion contained a "misleading statement." In support of their claim, plaintiffs point to Lazard Freres' opinion which states that Lazard Freres assumed that the projections of Cheyenne's management were "reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial performance of the company." This statement is misleading, according to plaintiffs, because Lazard Freres based its justification for adding four percentage points to the seventeen percent industry average cost of capital on its belief that management's estimates were higher than analyst's projections and its mistaken impression that Cheyenne had filled to meet management's projections since 1993. - ---------------------------- 4 Smith v. Van Gorkom, Del. Supr., 488 A.2d 858, 872 (1985). 5 Stroud v. Grace, Del. Supr., 606 A.2d 75, 85 (1992). 6 Rosenblatt v. Getty Oil Co., Del. Supr., 493 A.2d 929, 945 (1985), citing TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). 5 As noted by defendants, however, there is no inconsistency between Lazard Freres' assumption that management's projections were "reasonably prepared on bases reflecting the best currently available estimates and judgments" and Lazard Freres' belief that the risk inherent in that "best currently available" information warranted the use of a higher discount rate. The statement is not misleading. Currently available projections still may be subject to special risks--reflected in the higher discount rate--because of the nature of the computer software industry. On this record, therefore, I cannot accept plaintiffs' claim that additional information regarding the discount rate would significantly alter the total mix of information already available to Cheyenne's shareholders. C. The Balance of Hardships In addition to plaintiffs' failure to demonstrate a likelihood of success on the merits of their claims, they have also failed to show that the harm they would suffer if the preliminary injunction were denied outweighs the harm defendants would suffer if an injunction were granted. On this alternate ground, therefore, injunctive relief also should be denied. It is undisputed that Computer Associates' $30.50 per share tender offer represents a significant premium over Cheyenne's historical market price. Computer Associates' final offer is the result of intensive, arms-length negotiations. Cheyenne had been "in play" for months, and only one other company, McAfee, made an offer--a stock for stock proposal with no collar that was significantly less advantageous for Cheyenne shareholders. Computer Associates' proposal is an all-cash offer at a premium over market, with $30.50 available for all shares tendered now or acquired in the follow-up merger. Not only is Computer Associates' offer a substantially greater value than any other offer, it is undisputedly the only offer now available to Cheyenne's shareholders. No other company has even made an inquiry since Computer Associates' proposal was announced on October 7. Computer Associates has committed $1.2 billion in cash to make its tender offer, which closes on November 8. It will incur substantial costs if the closing date is delayed by an injunction. Moreover, the merger agreement contains an "injunction out" providing Computer Associates the opportunity to revoke its offer if it is judicially restrained. Computer Associates' representative has stated that the price will not be renegotiated and that Computer Associates has no reason to extend its offer in the event an injunction were issued.7 Thus, Cheyenne has no assurance that if I were to issue an injunction, Computer Associates will voluntarily extend its offer. Plaintiffs insist that a minor delay in the tender offer closing date would risk little, if any, harm to defendants, and yet would afford Cheyenne's Board an opportunity to investigate the transaction more fully and to provide additional information to shareholders. Furthermore, plaintiffs contend that shareholders who are concerned about receiving their $30.50 per share can obtain virtually all of that amount in the market, which has responded to Computer Associates' offer by driving Cheyenne's stock slightly above $30 per share. A number of cases in this Court have held that, absent special circumstances not present here, a preliminary injunction will not issue to restrain a third-party tender offer at a substantial premium over market. As Chancellor Allen said in Solash v. Telex Corp.:8 - ---------------------------- 7 S. Kumar Affidavit 20. 8 Del. Ch., C.A. Nos. 9518, 9525 and 9528, Allen, C. (Jan. 19, 1988), slip op. at 33. 6 [T]he balance of harm in this situation in which there is no alternative transaction and issuance of the injunction inescapably involves a risk that the shareholders will lose the opportunity to cash in their investment at a substantial premium requires not only a special conviction about the strength of the legal claim asserted, but also a strong sense that the risk in granting the preliminary relief of an untoward financial result from the stockholders' point of view is small. Repeatedly the plaintiffs' class action bar exhorts the court to bravely risk the consequences in circumstances such as these, asserting that more money to the shareholders, not less, will probably result. At least on facts such as these, a due respect for the interests of the class on whose behalf these exhortations are made, requires, in my judgment, that the invitations be declined. Feeling no "special conviction" about the strength of plaintiffs' legal claims and mindful of the significant risk that Cheyenne's shareholders may lose a limited opportunity to sell their stock at a substantial premium if an injunction were issued, I conclude that the balance of hardships tips overwhelmingly in favor of defendants. Furthermore, I cannot accept plaintiffs' suggestion that shareholders may avoid this risk by immediately selling into the price-adjusted market. This suggestion is based on the flawed assumption that the market price of Cheyenne's stock will not react negatively to news that Computer Associates' tender offer has been enjoined or that Computer Associates has refused to extend its offer. For all of these reasons, I deny plaintiffs' application for a preliminary injunction. IT IS SO ORDERED. -----END PRIVACY-ENHANCED MESSAGE-----