PAETEC Holding Corporation
Robbins Umeda LLP Announces an Investigation of PAETEC Holding Corporation
Robbins Umeda LLP, a shareholder rights litigation firm, has commenced an investigation into possible breaches of fiduciary duty and other violations of state law by members of the board of directors of PAETEC Holding Corporation (NASDAQ: PAET) in connection with their efforts to sell the company to Windstream Corporation (NASDAQ: WIN).
On August 1, 2011, PAETEC announced that it had entered into a definitive merger agreement under which Windstream will acquire all outstanding shares of the company in a stock transaction. Under the terms of the agreement, PAETEC shareholders will receive only 0.46 shares of Windstream for each share of PAETEC they own. Based on Windstream’s July 29, 2011 closing price, PAETEC shareholders can expect to receive the monetary equivalent of $5.62 per share. The transaction is expected to close in the next six months.
Robbins Umeda LLP’s investigation focuses on whether PAETEC’S board is undertaking a fair process to obtain maximum value and adequately compensate shareholders in light of the company’s recent positive financial results. On May 5, 2011, PAETEC announced first quarter results for fiscal year 2011 that exceeded analyst expectations. The company reported $495.5 million in revenue for the quarter, beating consensus estimates of only $493 million for the same period. Additionally, the company reported an adjusted EBITDA of $91.4 million on a margin of 18.4%, beating estimates of $88.7 million on a margin of 18.0%. Finally, leading financial analysts have released target prices for PAETEC that value the company’s stock at $7.00 per share, considerably higher than the value being offered by Windstream as a part of the merger agreement.
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