Robbins Arroyo LLP: Acquisition of QLogic Corporation (QLGC) by Cavium, Inc. (CAVM) May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of QLogic Corporation (NASDAQ: QLGC) by Cavium, Inc. (NASDAQ: CAVM). On June 15, 2016, the two companies announced the signing of a definitive merger agreement pursuant to which Cavium will acquire QLogic. Under the terms of the agreement QLogic shareholders will receive $11.00 cash and 0.098 shares of Cavium common stock for each share of QLogic common stock, the value of which is equivalent to $15.53.
Is the Proposed Acquisition Best for QLogic and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at QLogic is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $15.53 merger consideration represents a premium of only 14.2% based on QLogic’s average one month closing price. This premium is significantly below the average one month premium of nearly 74% for comparable transactions within the past three years. Further, the $15.53 merger consideration is below the target price of $16.00 set by an analyst at Argus Research Corp on October 27, 2015. In the last three years, QLogic traded as high as $15.93 on June 4, 2015, and most recently traded above the merger consideration – at $15.54 – on June 22, 2015.
On May 5, 2016, QLogic reported strong earnings results for its fourth quarter and full year 2016. QLogic reported net income of $18.2 million for the three months ended April 3, 2016, a 63% increase from the same period of the prior year. Additionally, QLogic has beaten analyst estimates for adjusted earnings per share and adjusted net income for the past four quarters, and has beaten analyst estimates for revenue in three of the last four quarters. In commenting on these results, QLogic Chief Financial Officer and acting Chief Executive Officer Jean Hu remarked, “I am very pleased with our financial performance during the fourth quarter and our strong finish for the second half of fiscal 2016. For the second consecutive quarter, we delivered both revenue and non-GAAP earnings per diluted share above the high end of our guidance range.”
In light of these facts, Robbins Arroyo LLP is examining QLogic’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
QLogic shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information. QLogic shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.