Convergys Corp. shareholders voting on $2.8 billion sale

Two shareholders fighting the deal in court
Posted at 9:08 AM, Oct 02, 2018
and last updated 2018-10-02 13:55:57-04

CINCINNATI -- Two Convergys Corp. shareholders are suing to prevent the company’s $2.8 billion acquisition by a California rival, claiming the purchase price “undervalues the company” and Convergys failed to disclose key details in seeking stock owners' approval of the transaction.

Convergys, which disputes all claims raised in both lawsuits, won the first legal skirmish on Sept. 26 when Hamilton County Common Pleas Judge Thomas Heekin rejected a preliminary injunction to prevent the companies from finalizing the deal.

Shareholders from Convergys and Synnex Corp. are voting on the transaction in separate meetings Wednesday morning.

If the deal goes through as planned, Convergys would be the third-largest of a dozen publicly traded companies to be sold or relocate its headquarters away from Cincinnati since 2014. About a thousand local jobs would be more vulnerable to downsizing, as Synnex is planning to trim $150 million from the combined annual budgets of both companies.

Shareholder Adam Franchi filed a proposed class action lawsuit Sept. 10, claiming “the intrinsic value of the company is materially in excess of the amount offered” by Synnex. He also claims the company structured its merger agreement to keep rival bidders from offering a higher price after the deal was announced. Finally, Franchi alleges Convergys failed to disclose financial details that its advisor used to conclude the transaction was fair to Convergys shareholders.

Shareholder Joel Zalvin made similar claims in his proposed class action complaint. But Zalvin took it a step further in a Sept. 20 motion for a preliminary injunction to prevent the Oct. 3 shareholder vote. Zalvin alleges pressure from activist shareholder Elliott Management Corp. caused Convergys “to engage in a rushed and haphazard sale process” that failed to obtain maximum value for the company. Zalvin also alleged Convergys failed to disclose how much board members could receive from the accelerated vesting of stock awards because of the transaction.

In a Sept. 25 court filing, Convergys said Zalvin’s allegations about Elliott Management were “made without any evidentiary basis, are not true and simply can’t be credited.” On director stock awards, Convergys filed a supplementary disclosure with the SEC that reveals how much eight of its board members will receive from restricted stock units. It also made some additional disclosures about its accounting treatment of stock awards and its relationship with Elliott Management.

Previously, it disclosed it entered into a confidentiality agreement with the activist shareholder and sought its input on the sale process. But on Sept. 25, it revealed the reason for the arrangement: It wanted Elliott’s assurance that it wouldn’t use confidential information against the company in a future proxy fight.

Finally, Convergys revealed that two independent proxy advisory services, ISS and Glass Lewis, have endorsed the deal. ISS said the transaction “will provide shareholders with an equity interest in a much larger entity, with an expanded geographic reach, increased scale, and a more diversified revenue base.”