Former Oncura Partners owners are seeking more than $24 million in a suit against Analogic (NSDQ:ALOG), claiming it engaged in a fraudulent scheme to avoid paying for Oncura after agreeing to acquire it in January 2016.
In the suit, filed July 31, Oncura owners claim that Analogic agreed to pay for their shares in the business over a 4-year period, based on revenue targets, but immediately began to dismantle the company and terminated its sales force to avoid paying.
Oncura is a veterinary technology company that offered veterinary ultrasounds systems and teleradiology services. Analogic produced the veterinary ultrasound systems sold by Oncura, according to the suit.
The plaintiffs claim that Analogic aimed to buy Oncura to enter the veterinary market through vertical integration, and after 3 rejected offers, it “convinced the plaintiffs to sell and accept deferred consideration for the sale by making numerous fraudulent statements to induce the sale,” according to court documents.
Analogic said it would support the company, hire on key executives and its sales team and support further research and development into the company’s next-generation products, according to the plaintiff’s claims, but failed to deliver on any of these promises.
In the suit, plaintiffs claim that less than a full year after the acquisition, Analogic decided it would not enter the veterinary market and began to wind down the business. This process included halting further R&D, releasing the sales team and associated executives and writing off the Oncura Partners acquisition.
“Analogic has destroyed Oncura Partners and the reputation of those of the plaintiffs who worked there post-merger. The plaintiffs would have never sold Oncura Partners to Analogic if they had known that Analogic had no intention of supplying Oncura Partners with a product to sell, the personnel needed to sell and service it, and the power to control the operations of Oncura Partners. The plaintiffs certainly would not have sold Oncura Partners to Analogic if they had know that Analogic never intended to stay in the veterinary medicine market or that it would exit the market after just the 1st year of the 4 earn-out years which formed the bulk of the consideration for the sale. Likewise, the key employees would have never entered into employment agreements, which were conditioned on the execution of the merger agreement, had they know that Analogic’s representations were false,” plaintiffs wrote in court documents filed late last month.
Plaintiffs in the case are seeking compensatory and consequential damages including earn-out payments they were denied, punitive damages and recovery of legal expenses.