An institutional investor, Laborers’ Local #231 Pension Fund, has filed a class action lawsuit alleging that Lionbridge Technologies has violated the Securities Exchange Act by misleading shareholders in order to accomplish a “going private” merger with H.I.G. Capital.
Lionbridge has described itself as a globalization company, providing translation, online marketing, global content management, and application testing solutions to major brands.
According to Robbins Geller Rudman & Dowd, the plaintiff’s lawyer, the December 2016 merger called for cash payments of $5.75 per share to Lionbridge shareholders. The lawsuit alleges that Lionbridge misled shareholders about “the company’s prospects and value” in a bid to get them to vote for the merger, even though the price offered was not adequate.
Management had projected growth in the company’s revenues of less than 3.9% a year for several years, a forecast that did not match Lionbridge’s average revenue growth of about 7% per year between 2011 and 2015, and also was inconsistent with management’s actual strategic plan for the company, the lawsuit alleges. Subsequently, most of Lionbridge’s shareholders voted for the merger in February 2017, and the merger was completed.
Lionbridge CEO Rory Cowan actually had plans to grow the company into a $1 billion brand, though the merger valued the company at about $356 million, with acquisitions being a key growth factor. The company announced at least one major acquisition just days after the H.I.G deal closed, the complaint alleges.
Thus, “while the company planned a series of acquisitions that would boost the company’s growth, earnings, and ultimate value, the defendants pitched the merger as if stockholders were being asked to choose between accepting the $5.75 per share and holding shares in a standalone company that would do nothing but muddle along with no growth through acquisitions,” the lawsuit alleges.
Cowan was also able to roll over a part of his Lionbridge stake into equity in the post-merger company, allowing him to get the benefit of the low purchase price, the lawsuit alleges. At the time of the merger announcement, Cowan stated, “The acquisition will allow Lionbridge to continue to focus on providing the most innovative language and technology solutions to more than 800 world-leading brands, while accelerating our proven leadership in global content and communications. Our board of directors believes this transaction is in the best interest of our stockholders and affirms Lionbridge’s tremendous value and market leadership.”
Other Lionbridge officers and directors, also defendants in the lawsuit, were able to cash in on their equity awards that had not vested, and also cash out of their illiquid Lionbridge stock holdings, according to the lawsuit. The complaint also states that the Lionbridge financial advisor for the deal, Union Square Advisors, benefited by receiving millions of dollars in fees related to the merger.
Lionsbridge declined the opportunity to comment.