iGate Sale Deal Comes Under Scanner of Law Firms

New York: As many as five US-based law firms are investigating charges of whether iGate's board of directors failed to maximise shareholders' gains before inking the multi-billion dollar deal with French rival Capgemini. These law firms are reaching out to shareholders and investors of iGate to join their investigation to ascertain if the company's board violated their mandate, which if proved could lead to class action law suits against the firm. Earlier this week, Capgemini agreed to acquire the New Jersey-based company for $4 billion in an all cash deal. The firms - WeissLaw, Rosen Law Firm, Ryan & Maniskas, Block & Leviton and Faruqi & Faruqi - are investigating for "possible breaches of fiduciary duty and other violations of law" as well as the fairness with which the iGate board considered and approved the transaction. When contacted, iGate declined to comment on the matter. Fiduciary duty is generally termed as a legal obligation of one party to act in best interests of another. The obligated party is typically a fiduciary, that is, someone entrusted with the care of money or property. "Under the terms of the proposal, Capgemini will acquire each iGate share for $48 in cash, a paltry premium of approximately 4.7 per cent," Boston-based law firm Block & Leviton said. "Not surprisingly, because it was able to acquire iGate at such a substantial discount to its true value, shares of Capgemini soared as high as $85.77 upon the announcement of the proposed transaction, representing double the premium received by IGATE shareholders." Market reports have stated that Capgemini has already secured voting power of 54 per cent to push the deal through, the firm added. "This support is likely underpinned by the nearly 26 per cent of the company held by Ashok Trivedi and Sunil Wadhwani, the co-founders and co-chairmen of iGate." "The two co-founders will collect approximately $1 billion of the total $4 billion in merger consideration expected to be paid in the proposed deal," it added. The high analyst price target on the investment website Yahoo! Finance was $55, about 15 per cent higher than the offer price. The value of the company's shares has increased around 35 per cent in just the past four months, it added. WeissLaw LLP, a class action shareholder rights law firm, in a statement said it is investigating "possible breaches of fiduciary duty and other violations of law" by the iGate board. Under the terms of the agreement, iGate shareholders will receive $48 in cash for each share they own. "WeissLaw is investigating whether iGate's Board acted to maximise shareholder value prior to entering into agreement. Notably, the offer price represents a premium of less 5 per cent over the company stock's April 24, 2015 trading price of $45.93. "Additionally, prior to announcement, at least one analyst set a target price of $55 per iGate share, or $7 above the offer price," WeissLaw added. Similarly, investor rights law company Rosen Law Firm is investigating whether the proposal is "fair to the public shareholders of IGATE and whether iGate's Board breached its fiduciary duties in connection with the proposed sale." Another law firm Ryan & Maniskas said its investigation concerns possible breaches of fiduciary duty and other violations of state law by the board of directors of iGate for "not acting in the company's shareholders' best interests in connection with the sale process". Juan Monteverde, a partner at Faruqi & Faruqi, said it is also looking into "by how much this proposed transaction undervalues the company to the detriment of iGate's shareholders". Since 2013, iGate has been facing legal hurdles beginning with the unceremonious removal of CEO Phaneesh Murthy, who was accused of sexually harassing investor relations head Araceli Roiz. This resulted in a law suit filed by Ms Roiz against iGate and Mr Murthy in the same year, but was later settled out of the court. In May 2013, Mr Murthy filed a law suit before a California court stating that iGate knew of his relationship and had "improperly" used the reporting policy to terminate him. Mr Murthy, in his suit, had also said iGate had withheld his vested stocks and various benefits due to him. The case was settled in February this year. In 2013 itself, IGATE was slapped with yet another class action lawsuit for alleged violations of federal securities laws. The charges related to the firm failing to disclose that Mr Murthy was involved in an "improper relationship with a subordinate employee" in violation of iGate's policies. The case was later dismissed. In September 2014, iGate faced another sexual harassment suit by an ex-employee, claiming that she was sexually abused by Legal Head and her supervisor. Karetha Dodd, a US national, sued iGate and her supervisor Mukund Srinath on charges of sexual harassment. Ms Dodd also alleged that she was targeted at iGate after she testified against its then CEO Mr Murthy who was accused of sexually harassing Ms Roiz.

iGate Sale Deal Comes Under Scanner of Law Firms

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