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Dent v. Ramtron International Corporation

Court of Chancery of Delaware

June 30, 2014

PAUL DENT, On Behalf of Himself and All Others Similarly Situated, Plaintiff,
v.
RAMTRON INTERNATIONAL CORPORATION, ERIC A. BALZER, THEODORE J. COBURN, JAMES E. DORAN, WILLIAM L. GEORGE, WILLIAM G. HOWARD Jr., ERIC KUO, CYPRESS SEMICONDUCTOR CORPORATION and RAIN ACQUISITION CORP., Defendants.

Date Submitted: March 25, 2014

James R. Banko, Esq., Raj Srivstan, Esq., FARUQI & FARUQI, LLP, Wilmington, Delaware; Attorneys for Plaintiff Paul Dent.

Raymond J. DiCamillo, Esq., Brock E. Czeschin, Esq., Scott W. Perkins, Esq., Nicole C. Bright, Esq., RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for Defendants Ramtron International Corporation, Eric A. Balzer, Theodore J. Coburn, James E. Doran, William L. George, William G. Howard Jr. and Eric Kuo.

A. Thompson Bayliss, Esq., ABRAMS & BAYLISS, LLP, Wilmington, Delaware; Steven Guggenheim, Esq., WILSON SONSINI GOODRICH & ROSATI, Palo Alto, California; Attorneys for Defendants Cypress Semiconductor Corporation and Rain Acquisition Corp.

MEMORANDUM OPINION

PARSONS, Vice Chancellor.

This action arises from the acquisition of a technology company by a third party, strategic buyer. The plaintiff, a former stockholder of the acquired entity, makes the same allegations that have become routine in the ubiquitous shareholder litigation that immediately follows the announcement of any public company merger or acquisition transaction: the target board breached its fiduciary duties by failing to maximize the value of the entity, locking up the deal impermissibly in the acquirer's favor, and disseminating a proxy statement containing material misstatements or omissions, and the acquiring company aided and abetted those breaches. The challenged transaction was completed in 2012. At this time, the plaintiff seeks, among other monetary relief, quasi-appraisal to obtain an award of the fair value of his shares as of the date of the acquisition.

Two groups of defendants, the target company's board of directors and the acquirer, each have moved to dismiss the complaint on the grounds that the plaintiff has failed, in every count of the complaint, to state a claim upon which relief can be granted.

Having considered the parties' briefs and heard argument on the motions, I conclude that the defendants' motions to dismiss should be granted, and the complaint dismissed in its entirety.

I. BACKGROUND

A. The Parties

Plaintiff, Paul Dent, is a stockholder of Ramtron International Corporation ("Ramtron, " or the "Company"), and purportedly has been a Ramtron stockholder at all times relevant to this litigation.

Defendant Ramtron is a Delaware corporation engaged in the business of designing, developing, and marketing specialized semiconductor products. Ramtron is named as a necessary party in connection with Dent's request for equitable relief.

Defendants Eric A. Balzer, Theodore J. Coburn, James E. Doran, William L. George, William G. Howard, and Eric Kuo (collectively, the "Individual Defendants") comprised Ramtron's Board of Directors (the "Board") until October 10, 2012. On that date, Belzer, Doran, and Kuo resigned from the Board.[1]

Defendant Cypress Semiconductor Corporation ("Cypress") is a Delaware corporation headquartered in San Jose, California. Cypress is a world leader in USB controllers and SRAM memories and operates in numerous market segments, including consumer, mobile handsets, industrial, and military. Ramtron is now a wholly owned subsidiary of Cypress.

Defendant Rain Acquisition Corp. ("Rain, " and together with Ramtron, the Individual Defendants, and Cypress, "Defendants") is a wholly owned Cypress subsidiary, which was formed to effectuate the merger between Cypress and Ramtron.

B. Facts[2]

1. Cypress first approaches Ramtron

On March 8, 2011, Cypress made an unsolicited offer to acquire Ramtron for $3.01 per share, which represented a 37% premium to the Company's share price at the time. In response, on March 11, Ramtron created a Strategic Transaction Committee (the "2011 Committee") consisting of Howard, Balzer, Kuo, and Coburn to evaluate Cypress's offer. After meeting on several occasions with the Company's outside legal and financial advisors, on March 21, 2011, the 2011 Committee informed Cypress that it had rejected Cypress's offer as inadequate and that the Company would not be making a counterproposal.

Soon thereafter, the Company raised additional capital through a dilutive public stock offering at a net price of $1.79 per share. After the public offering, Ramtron's stock price traded as low as $1.65 per share.

2. Cypress approaches Ramtron again

Over a year after having its initial offer rejected, on June 12, 2012, Cypress renewed its efforts to acquire Ramtron with a cash offer of $2.48 per share. Similar to Cypress's March 2011 offer, the June 2012 offer represented a 37% premium to the Company's share price at the time. In its offer, which was made public, Cypress indicated that it preferred to proceed through a negotiated agreement, but that it was prepared to take the necessary actions to acquire Ramtron even if an agreement could not be reached.

In response, the Board formed a new Strategic Transaction Committee (the "2012 Committee") consisting of Defendants Howard, Balzer, Coburn, Doran, and George to consider, among other things, Cypress's new offer. On June 17, the 2012 Committee decided to reject the offer, and authorized Needham & Company ("Needham"), the Company's financial advisor, to begin contacting third parties who potentially would be interested in engaging in a transaction with Ramtron. The following day, the Company filed a Schedule 14D-9 with the U.S. Securities and Exchange Commission ("SEC") advising its stockholders not to tender their stock to Cypress at the $2.48 per share tender price.

Also on June 18, Ramtron invited Cypress to participate in its evaluation of strategic alternatives, and sent a draft confidentiality agreement to Cypress's financial advisor to initiate such a process. Cypress, however, declined to execute the confidentiality agreement or otherwise participate in the Company's review of strategic alternatives.

On June 21, 2012, Cypress commenced a tender offer for Ramtron's shares at a price of $2.68 per share. In a July 5, 2012, Schedule 14D-9 filing, the Company again recommended that its stockholders reject Cypress's offer. The June 21 tender offer was scheduled to expire on July 19, 2012, but was renewed on July 20, August 6, and August 20, 2012, after failing to generate sufficient interest from the Company's stockholders.

During this same timeframe, the Company continued to explore various strategic alternatives. This included contacting 24 potential purchasers, and entering into confidentiality agreements with seven entities that showed interest in completing a deal with Ramtron. At no time did any of these, or any other, entities make an offer to acquire the Company.

On August 27, 2012, Cypress again raised its offer to acquire Ramtron, this time to $2.88 per share. On September 4, the 2012 Committee authorized Needham to inform Cypress's financial advisor that an offer of $3.50 per share would position Cypress well among the Company's strategic alternatives. Cypress, however, never so much as even countered this overture. On September 8, 2012, after discussing Cypress's most recent proposal with its legal and financial advisors, the Board voted unanimously to reject that offer and recommend that its stockholders not tender their shares at the price Cypress was offering. The Board disclosed this decision and recommendation in a September 10, 2012 Schedule 14D-9 filing.

3. Cypress and Ramtron negotiate and reach an agreement

On September 15, 2012, Ramtron's Board authorized Needham to make a counterproposal under which Cypress would acquire the Company for $3.25 per share. In negotiations the following day, Cypress offered to raise its bid for Ramtron to $3.01. Ramtron and Cypress continued to negotiate, and on September 19, 2012, the parties issued a joint press release stating that they had reached an agreement for Cypress to purchase the Company for $3.10 per share in an all-cash tender offer (the "Initial TO").[3]

On September 25, 2012, Ramtron filed a schedule 14D-9 recommending that its stockholder tender their shares into the Initial TO. The Initial TO then was launched, and it expired at midnight on October 9, 2012. The following day, Cypress issued a press release stating that it had acquired 23.3 million Ramtron shares through the Initial TO, thus increasing its ownership position in the Company to 72%. Cypress also announced that it would be commencing a subsequent offering period (the "Subsequent TO"), expiring on October 17, 2012, for all remaining untendered Ramtron shares.

On October 18, 2012, Cypress announced that it acquired only an additional 6% of Ramtron's shares in the Subsequent TO. Because at 78% ownership Cypress did not have sufficient shares to effectuate a short-form merger with Ramtron under Delaware law, it filed an amendment to its Schedule TO stating that Defendants would be scheduling a vote for Ramtron's stockholders to vote on a long-form merger.

Ramtron filed its definitive Proxy related to the stockholder vote on October 29, 2012 (the "Proxy"). The Proxy contained summaries of four financial analyses conducted by Needham, including a discounted cash flow ("DCF") analysis based on Ramtron's management projections. The projections were not included in the Proxy. Of the four analyses, the transaction consideration of $3.10 was below only the $3.57 to $5.01 per share valuation range implied by the DCF.

On November 20, 2012, Ramtron's stockholders approved the Company's ...


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