Cogentix Medical (NSDQ:CGNT) shareholders late last week filed a class action suit against the company seeking to block its $214 million acquisition by Laborie Medical Technologies under allegations that the company ignored a better offer and engaged in unfair protective provisions.
In the newly filed suit, plaintiffs allege that the board breached its fiduciary duties by agreeing to an acquisition offer of $3.85 per share from Laborie, despite receiving a separate offer of $4.05 per share from a different group.
Shareholders in the suit, filed in the Delaware Chancery Court, allege that the board declined the higher offer due to “an unsubstantiated perception that [the higher bidder] might lower its offer price and a general belief that [the higher bidder]’s all-cash, non-financed offer presented less closing certainty,” according to court documents.
Shareholders go on to allege that the board never engaged the higher bidder in discussions over the offer, conducted reverse due diligence or permitted more due diligence or a revised offer from the party.
The suit also claims that Cogentix’s board agreed to protection provisions to eliminate possible offers from other parties and to lock down the acquisition by Laborie Medical Technologies. Those provisions include a confidentiality agreement which has not had its terms disclosed to stockholders and tender and support agreements with stockholders that own 59.4% of the company’s shares.