An announcement came through that Sizmek Inc. (NASDAQ: SZMK) has agreed to sell itself to a private-equity firm called Vector Capital. Some $122 million in cash is set to change hands in favor of Sizmek shareholders as the deal values Sizmek at $3.90 a share.
But not everyone is convinced that selling Sizmek Inc. (NASDAQ: SZMK) at a price of $3.90 makes economic sense. That has led shareholder rights attorneys at Brower Piven to question whether the board of Sizmek played its role well in that as required by law in accepting Vector’s $3.90 per share buyout offer.
When a company decides to sell itself, the board is required to ensure that shareholders are getting the best valuable possible from the transaction. That sometimes means pursuing alternative offers to one that has been placed on the table.
Breach of fiduciary duty at Sizmek Inc. (NASDAQ: SZMK)?
As such, the investigation by the shareholder rights attorneys at Brower Piven is concerned with whether the board of Sizmek Inc. (NASDAQ: SZMK) breached its fiduciary duty. As an example of why the deal warrants investigation, the firm has cited that the price of $3.90 per share being offered to shareholders of Sizmek is a far cry from the stock’s 52-week high of $7.74.
Therefore, the firm notes that there are chances that shareholders of Sizmek are not going to enjoy any real gain from the transaction. In fact, they could be losing value on their investment. The law firm has encouraged shareholders of Sizmek to contact it so that they can discuss their rights in relation to the legal action.
Where does the $122 million offer stand?
The $122 million that Vector is paying for Sizmek Inc. (NASDAQ: SZMK) is significantly more than the company’s market cap of $74 million just before the buyout deal was announced. But the offer is less than Sizmek’s market cap of $150 million last year.
The management also seems to believe that buyout is the best thing that could happen to Sizmek. CEO Neil Nguyen said that selling to Vector will provide Sizmek with access to resources that it needs to pursue its long-term strategy.
It is worth pointing out that Sizmek Inc. (NASDAQ: SZMK) has gone through phases of transformation in the recent years, at some point selling some of its assets to a rival company.