Big Payments and Lawsuits Spring up from Sybase Merger…

May 28, 2010

Just as the summer horizon would seem uncharacteristically empty without dandelions, it’s hard to imagine the M & A landscape without shareholder lawsuits.

Thus, it’s no real surprise that after SAP America, a subsidiary of SAP AG (SAP) announced May 12 that that it was acquiring Sybase, Inc. (SY) in a $5.8 billion transaction, a number of lawsuits sprang up to challenge the deal and block the merger. (Michelle wrote about the deal recently here.)

Litigation can be interesting, to be sure, but we’re more interested in the big payouts that Sybase disclosed in the SC 14D9 form that it filed May 26.

With respect to common stock, the filing notes that Sybase’s officers and directors will get the same deal as other shareholders, stating:

If the directors and executive officers tender all of the 191,595 Shares owned by them as of May 25, 2010 (which number of Shares excludes restricted Shares and options to purchase Shares, which are addressed in the succeeding paragraph below)…, the directors and executive officers will receive an aggregate of $12,453,675 in cash—. to the knowledge of Sybase, all of Sybase’s directors or executive officers currently intend to tender all of their Shares for purchase pursuant to the Offer.

There’s no way to easily summarize how the restricted stock awards will be treated (it’s on p. 4 if you’re interested), but the filing adds that —As of May 25, 2010, an aggregate of 1,089,772 unvested Shares underlying restricted stock awards were held by the directors and executive officers of Sybase.

A chart also shows that if Sybase’s leaders cash out their options, stock appreciation rights, and restricted stock awards, CEO John Chen will receive more than $97 million in total cash consideration for his equity interests. The other named directors and executives stand to collect between $2.69 million to $18.5 million each. And because these sums are in addition to any payments triggered by the various change in control scenarios, the actual payouts could be much higher.

Sybase contends that SAP’s offer to pay $65.00 in cash per share for its common stock is fair. In a March 13 filing, Sybase noted that —the per share purchase price represents a 44% premium over the three-month average stock price of Sybase.

However, the various disgruntled shareholder groups don’t seem convinced. Claims to block the merger allege that Sybase did not properly —[shop] for a deal that would provide better value for shareholders or that there were —potential breaches of fiduciary duty and other violations concerning the transaction’s approval by Sybase’s board of directors. Yet another firm claims that —the merger agreement includes a $150 million termination fee and a clause prohibiting the Board from discussing or seeking any superior proposals. Sybase has also granted SAP a —top-up option to bring SAP’s ownership of the Company’s stock to one share more than 90% to help ensure the completion of the merger.

We’ll leave it to the attorneys to sort these disputes out. Meanwhile, fair or not, the deal certainly promises big bucks for Sybase executives.

Image source: lightmatter via Flickr

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