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By | Gavin Clarke 20th April 2015 11:20

HP's $3 BEELLLION Aruba buy ‘significantly undervalues’ wireless operator

Giant's deal a steal, almost literally, alleges litigant

Hewlett-Packard’s proposed $3 billion purchase of wireless mobile specialist Aruba Networks is facing a legal hurdle.

A case has been filed in a US court against HP, Aruba, its management and board members claiming HP’s price drastically undervalues the firm.

The case (5:15-cv-01502) claims the proposed deal is unfair, because terms have been written in that block out other potential bidders and give preferential treatment to HP.

It points out the presence of the management team and board with backgrounds at HP.

The case adds that Aruba’s board are acting simply to unlock $144 million in stock and defendants filed a report with US financial regulators that was misleading as it omitted details of the sale – those giving preferential treatment to HP.

The case was filed by an Andrew Newfield earler this month in a court in the San Jose division of California. He is seeking to rally Aruba shareholders by having the case accorded class-action status.

Newfield essentially wants the HP deal put on hold, and for “a transaction that is in the best interests of Aruba shareholders” and for management not to enter into a sale or merger until “the highest possible value is obtained".

HP said it would not comment on pending litigation, while Aruba didn’t return our requests for comment.

HP announced its plans to buy Aruba in March, for a price of $24.67 a share, valuing the firm at $3 billion. The plan is for Aruba, founded in 2002, to become an HP subsidiary led by current chief executive Dominic Orr and co-founder Keerti Melkote. Aruba will become part of HP’s Enterprise Group and the transaction expected to close sometime between May and October.

According to the filing, the deal “significantly undervalues” Aruba. It cites four Wall Street analysts who’d set the Aruba price at between $27 and $34 a share.

The deal is also said to include a no-solicitation provision that stops Aruba talking to bidders other than HP.

In the event of a fresh bid, Aruba must to deliver HP confidential, non-public information about the competing proposal so HP could match it and Aruba would have to pay HP a $90 million termination fee should it withdraw from the deal.

These are the terms the court filing claims were withheld from its proxy filing.

The suit claims a bias towards HP in Aruba’s management: Orr is a former HP staffer, although he’s worked at a number of other tech firms, too, while a number of Aruba’s board of directors also have time spent at HP on their CVs. ®

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