Crane v. Varian Semiconductors: Massachusetts Tech Lawsuit alleges Merger not best for Investors

A Massachusetts technology lawsuit between Varian Semiconductor Equipment Associates Inc. (VSEA) and a group of its investors is heating up; shareholders claim they will be shortchanged by a $4.9 billion takeover offer from Applied Materials Inc. (AMAT).

As we reported recently, Massachusetts business law attorneys have seen an increase in merger and acquisition activity with the beginnings of the economic rebound. And while an experienced law firm is always required to handle such complex transactions, technology startups are best served by having experienced legal representation during the formation and investment stage. How a business is formed — and how investors are brought on board — can go a long way toward determining investor rights during such disputes.
In this case (Crane v. Varian Semiconductors, U.S. District Court, District of Massachusetts), investor David Crane contends members of the board of directors of Varian violated U.S. securities laws, issued misleading proxy materials, and failed to fully explain the sales process. The lawsuit also alleges that it’s unclear why the board chose to negotiate exclusively with Applied Materials Inc. Crane contends shareholders will not receive a fair price unless the transaction is stopped by a court.

Varian Semiconductor Equipment Associates Inc. is based in Gloucester, Massachusetts. The company designs, manufacturers and services semiconductor processing equipment used to make integrated circuits. The company has more than 3,000 high current, medium current and high energy implanters installed at facilities throughout the world. The systems implant more than 5 million wafers per day.

Applied Materials Inc., based in Santa Clara, California, provides equipment, services and software to manufacturers of semi conductor, flat panel display and solar photovoltaic products. Applied agreed to buy the company in anticipation of increased demand for microchip technology used in mobile devices. News of the lawsuit sent Varian stock up slightly; the stock has risen 66 percent so far this year.

Applied announced the signing of the merger agreement in May, which valued Varian at $63 a share. At the time, the price represented a 55 percent premium to Varian’s closing stock price. Upon completion of the deal, it was announced that Varian would operate as a business unit of Applied’s and would continue to be based on Gloucester.

“We believe the opportunity is very attractive for Varian’s customers, employees and shareholders,” Varian’s chief executive officer Gary Dickerson said at the time. “In addition to our combined strengths in the semiconductor space, Applied’s proven capability to extend its technology to adjacent markets like solar and display can help unlock the tremendous potential of ion implantation in these markets.”

Varian is a manufacturer of the ion implantation technology, which is currently used in Internet applications, personal computing and telecommunications. The companies have said the their combined efforts should open new markets for the technology.

The stock is currently trading at about $61 a share.

The Massachusetts business law attorneys at The Brown Law Firm, LLC are available for no-cost, confidential consultations. Call (617) 489-0817.

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