3Com's Deal With HP Faces Scrutiny
Computer giant Hewlett Packard’s proposed $2.7 billion acquisition of Marlborough-based 3Com Corp. has hit some roadblocks, including a handful of shareholder lawsuits and a reported Securities and Exchange Commission investigation into insider trading.
At least five lawsuits have been filed against 3Com since the Nov. 11 announcement, including one filed by 3Com shareholder Edward Tansey of Maine. Tansey is asking the U.S. District Court in Boston to stop the deal, alleging that 3Com executives were not working in the best interest of shareholders.
Other cases include two that were filed by Richard Hall and Leonard Ahern in the Sussex County Delaware Court of Chancery, according to a clerk in that court. Those cases name 3Com, the company’s executives, and HP for breaching “fiduciary duties.”
Two other Massachusetts cases have been filed in Suffolk Superior Court by 3Com shareholders Dean Davenport and Stanley Tanzer. Lawyers for each did not return phone calls for comment.
Lawyers for 3Com and a spokesperson for HP declined to comment on the litigation and referred all comment regarding the acquisition to press releases from the companies.
Price Points
HP announced it was purchasing 3Com on Nov. 11 for $7.90 per share, or a total estimated cost of $2.7 billion. On Nov. 23, 3Com shares closed at 7.46 per share.
3Com stock closed at $5.41 per share the day before the deal was announced, but after the news broke, it closed at $7.46. That’s up significantly from a year ago when the stock was trading below $2 per share.
For HP’s takeover of 3Com to be complete, the companies must receive approvals from regulators in the United States, China and Europe, and 3Com’s stockholders, according to filings 3Com made with the SEC.
Meanwhile, Bloomberg reported last week that the SEC is investigating allegations of insider trading before the proposed acquisition was announced.
An SEC spokesperson said the federal financial oversight agency does not confirm or deny investigations.
Bloomberg reported that option trading hit a 26-month high the day the merger was announced.
The day before the public announcement of the deal, about 6.5 million shares of 3Com stock were traded, which compares to the daily average volume of about 4.5 million shares.
According to 3Com’s most recent quarterly filings with the SEC, the company posted sales of $290 million in the three month period ending in August, 2009. That’s down from $342 million in the same time period last year.
The company focuses on networking and computer security.
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