When 3M announced it was buying Cogent Inc., there was speculation that the price would go higher.
The speculation apparently was wrong.
3M has dug in against intense shareholder opposition to the merger and held to its original $10.50 per share in its recent second tender offer. Dissident shareholders want as much as $15, and are suing to get it.
Pasadena-based Cogent, which makes security identification systems using a person’s fingerprints or iris, became an acquisition target on Aug. 30 when 3M announced the $10.50 tender offer. Analysts and shareholders immediately called it a lowball, even though Ming Hsieh, the company’s founder and chief executive, had already agreed to support it. Hsieh is the company’s largest stockholder with 39 percent of outstanding shares.
3M, an industrial conglomerate in St. Paul, Minn., announced Oct. 8 that the tender offer ended with its purchase of 52 percent of Cogent’s shares. While that gives 3M majority control, it fell short of the company’s goal of acquiring 90 percent of shares, which would give it the legal right under Delaware law to proceed with a streamlined buyout. If it fails to reach 90 percent, the acquisition will take longer.
That’s the road this merger appears to be taking.
Atlantic Investment Co., with 2.8 percent of Cogent shares, has stated the shares are worth $15. Another shareholder, Corbyn Investment Management, with 2 percent, wants at least $12.50.
Michael Hanrahan, an attorney at Prickett Jones & Elliott in Wilmington, Del., represents shareholders in a class action lawsuit against the acquisition. They lost the first round, but he claimed his clients will appeal.
As soon as the tender offer expired, 3M announced a second offer at the same price, which expires Oct. 22. Donna Fleming Runyon, a spokeswoman for 3M, declined to comment. Cogent did not return calls for comment.
Terry Mackin, general manager of acquisition advisory firm Generational Equity in Dallas, said that even if 3M now controls a majority of shares, the company needs to lower its risk by convincing stockholders to sell during the secondary offering.
“In our litigious society, any time you leave minority stockholders dangling, you risk a lawsuit,” Mackin said. “Buyers often tell us they don’t want to pursue an acquisition unless 100 percent of the shareholders are on board.”
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