Wednesday, December 7, 2011

Magma sale to Synopsys causes eruption of shareholder claim investigations

The November 30 announcement by Magma Design Automation , that they had entered into an agreement to be acquired by Synopsys for $507M, has resulted in an eruption in potential lawsuits over the low valuation.

This is just a sample of the number of announced investigations:

Like a school of sharks in bloody waters, the law firms are drawn to the discrepancy between the offer price of $7.35 per share and recent market prices for Magma's publicly traded stock. Shares of LAVA had been trading as high as $8.45 this past summer, closing at $7.41 just four months earlier - on August 2.

As recently as August 31, 2011, in the company's Proxy Statement, Magma's compensation committee reported:
Effective May 2, 2011, the Compensation Committee approved the reinstatement of the annual base salary levels for the Named Executive Officers to the pre-2009 reduction levels based on its subjective assessment of the Company's overall financial position and the improved market conditions in general. After giving effect to the reinstatement, base salary levels for each of the Named Executive Officers for fiscal 2012 are as follows:

Fiscal 2012
Named Executive Officer
Annual Base Salary($)
Rajeev Madhavan
Peter S. Teshima
Roy E. Jewell

Magma CEO Rajeev Madhavan's salary had been increased for Fiscal Year 2009, from $475,000 to $510,000, in April 2008. In the most recent available Fiscal 2010 Synopsys Proxy Statement, CEO Aart de Geus's reported salary in that same fiscal year was $500,000.

It appears that Magma's board will called on to explain what changed in just 3 months.

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