A complaint seeking class action status was entered Oct. 14 in Massachusetts Superior Court in Boston, seeking an injunction to block Covidien’s $12-a-share cash bid for the Norwood, Mass.-based brain monitoring equipment maker. The suit alleges Aspect executives and board members, including company founder and CEO Nassib Chamoun, led a flawed sale process and accepted too low a price.
Also named as defendants are Mansfield, Mass.-based Covidien, formerly Tyco Healthcare, and its American subsidiary, U.S. Surgical Corp.
A similar suit was filed Oct. 13 in Delaware Chancery Court. Both cases were disclosed in securities documents filed Monday by the companies and follows an effort announced last week by a New York-based law firm to round up Aspect shareholders for a class-action lawsuit.
According to recent securities filings by Aspect, the firms began discussing a possible merger in January, following a breakfast meeting between Chamoun and Rich Meelia, Covidien’s president and CEO. Meelia was an Aspect director from April 2001 until September 2005, when he resigned because of a potential conflict of interest.
Officials at the two companies talked about a potential deal for several months, with Meelia phoning Chamoun June 25 with an offer of between $7.50 and $8 a share. The two next met July 17, with Chamoun telling Meelia his board members believed Covidien was undervaluing Aspect and suggested the firm increase its bid.
Discussions continued over the next two weeks; Meelia called Aspect chairman John O’Connor Aug. 4 with the $12-per-share offer. According to Aspect officials, the board still considered the bid too low but agreed to let Covidien continue its due diligence ahead of a possible deal. Aspect made a $13 counter-offer Sept. 14, but Covidien did not bite.
A definitive merger agreement was inked Sept. 27. In setting its price, Covidien said the $210 million deal marked a 104 percent premium above Aspect’s enterprise value, adjusted for its cash and investments, and a 92 percent premium over the volume-weighted average of its stock price during the previous 30 days.
Officials with both companies said they’re fighting the suits.