June 1, 2004 -- (WhatTheyThink.com - by Gail Nickel-Kailing, WTT Senior Editor) -- In the first quarter of 2003, the duel between Creo and EFI over Printcafe captured a lot of attention. We all know the end of the story: EFI acquired Printcafe, Creo pocketed $22.1 million, and everybody lived happily ever after. But there was still one nagging little detail – an open suit by Creo against EFI. Now that little detail has been resolved.
A Little Background
In mid-February 2003, after several rounds of desk pounding between participants, EFI entered into several agreements with Printcafe to facilitate the merger between the two companies. Those agreements were intended to limit Creo’s ownership of Printcafe to less than 50% and to put a shareholder rights plan in place – often referred to as a “Poison Pill” – to give the Printcafe Board of Directors more time to ensure that the rights of the company’s shareholders were protected.
So what exactly is a “poison pill?” A “poison pill” is an anti-takeover device that gives a prospective acquiree's shareholders the right to buy shares of the firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the cyanide pill that secret government agents are said to be instructed to swallow if capture is imminent.
In response to Printcafe’s move, and to facilitate the closure of a purchase of shares from an investment group called J. & W. Seligman & Co. that would have given Creo about 55% ownership of Printcafe, Creo began litigation in the Delaware Court of Chancery against EFI, Printcafe and some of Printcafe’s principal officers and directors. The suit challenged the agreements between EFI and Printcafe and sought an order to restrain the companies from entering into any further agreements regarding the business merger.
The Court denied the temporary restraining order sought by Creo, and EFI and Printcafe entered into a merger agreement; EFI’s acquisition of Printcafe closed on October 21, 2003. Although the restraining order was denied, six complaints remained open and unresolved.
In February 2004, almost exactly one year after initiating the lawsuit, Creo agreed to dismiss “all claims against all parties with prejudice without any payment by any of the parties.” The Delaware Court granted an order for dismissal with prejudice on February 19, 2004.
Translation: the court delivered its final judgment dismissing Creo’s various claims (with Creo’s agreement) and put into place measures that prevent Creo from rechallenging EFI with the same issues in future litigation. Neither party was required to make any payments to the other.
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