United States District Court, D. Colorado
GEORGE ASSAD, individually and on behalf of all others similarly situated, Plaintiff,
DIGITALGLOBE, INC., et al., Defendants. JEWELTEX MANUFACTURING INC. RETIREMENT PLAN, on behalf of itself and all others similarly situated, Plaintiff,
DIGITALGLOBE, INC., et al., Defendants. ROYCE BUSSEY, individually and on behalf of all others similarly situated, Plaintiff,
DIGITALGLOBE, INC., et al., Defendants. DANE GUSSIN, Plaintiff,
DIGITALGLOBE, INC., et al., Defendants. STUART ZAND, individually and on behalf of all others similarly situated, Plaintiff,
DIGITALGLOBE, INC., et al., Defendants.
A. BRIMMER UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff's Motion for
Preliminary Injunction filed by plaintiff Dane Gussin in
Gussin v. DigitalGlobe, Inc., et al., Case No.
17-cv-01190-PAB, Docket No. 19
(“Gussin”), and Plaintiff's Motion
for Preliminary Injunction filed by plaintiff Stuart Zand in
Zand v. DigitalGlobe, Inc., et al., Case No.
17-cv-01570-PAB, Docket No. 14 (“Zand”).
Movants ask the Court to preliminarily enjoin a shareholder
vote by defendant DigitalGlobe, Inc. related to a proposed
merger that is scheduled for July 27, 2017.
securities dispute arises out of the proposed merger of
DigitalGlobe, Inc. and a subsidiary of MacDonald, Dettwiler
and Associates Ltd. (“MDA”). Docket No. 25 at
There are five consolidated cases pending before this Court.
Id. at 4. All five cases assert claims under the
Securities Exchange Act of 1934, 15 U.S.C. § 78a et
seq., and Securities and Exchange Commission
(“SEC”) Rule 14a-9, 17 C.F.R. § 240.14a,
related to the proposed merger of DigitalGlobe and MDA.
See Docket No. 25 at 2-3. Two of the cases include
motions for a preliminary injunction. Id. These
motions seek to enjoin DigitalGlobe's shareholder vote on
the merger, which is set to be held on July 27, 2017.
DigitalGlobe is a Delaware corporation with its headquarters
in Westminster, Colorado that provides high-resolution
satellite imagery of the Earth and related data and analysis
to clients including the United States government.
Gussin, Docket No. 29-4 at 34. MDA is a Canadian
telecommunications and information services conglomerate.
Id. at 33.
began seeking buyers of itself or some of its assets in 2015.
Gussin, Docket No. 29-4 at 100. On November 20,
2016, MDA made a “non-binding indication of interest to
merge with DigitalGlobe in an all-stock transaction at no
premium to the trading price of DigitalGlobe.”
Id. at 100-101. MDA and DigitalGlobe negotiated over
the next several months. Id. at 101-07. DigitalGlobe
also discussed potential transactions with other entities.
Id. at 104-05. On December 6, 2016,
DigitalGlobe's board of directors formed a transactions
committee to explore potential offers. Id. at 102.
On January 27, 2017, MDA offered a combination of $17.50 in
cash and $17.50 worth of stock in MDA for each share of
DigitalGlobe, which became the framework for the final deal.
Id. at 107. On February 17, 2017, news of the
proposed merger leaked out, and media reports were published
that MDA was in discussions to acquire DigitalGlobe.
Id. at 111.
February 24, 2017, DigitalGlobe and MDA entered into and
announced an agreement and plan of merger (“Merger
Agreement”). Gussin, Docket No. 29-4 at 4.
Pursuant to the terms of the Merger Agreement, DigitalGlobe
will merge with a special-purpose subsidiary of MDA, with
DigitialGlobe's shareholders receiving $17.50 in cash and
0.3132 shares of MDA for each share of DigitalGlobe that they
own. Id. The day before news of the proposed merger
broke, the market value of this consideration was
approximately $35.00, representing a premium of approximately
18% over DigitalGlobe's closing price on that date.
transaction will result in DigitalGlobe shareholders owning
approximately 37.1% of the combined company. Gussin,
Docket No. 29-4 at 4-5. After the completion of the
transaction, three members of DigitalGlobe's board will
be appointed to positions on MDA's board of directors.
Id. at 162. DigitalGlobe board member Nick S.
Cyprus, who served on DigitalGlobe's transactions
committee, is one of the people set to be appointed to
MDA's board. Id.
April 27, 2017, DigitalGlobe and MDA filed an F-4
registration statement in relation to the proposed
transaction. Gussin, Docket Nos. 29-2, 29-3. The SEC
reviewed the filing and, on May 24, 2017, the SEC commented
on the registration statement, requesting nine changes.
Gussin, Docket No. 29-7. None of the requested
changes is related to issues raised by movants in the present
motions. In response to the SEC's comments, DigitalGlobe
and MDA filed an amended F-4 registration statement on June
2, 2017. Gussin, Docket No. 29-4 at 2. References to
the “registration statement” below refer to the
the negotiations process, DigitalGlobe engaged PJT Partners
LP and Barclays Capital, Inc. (“Barclays”) to
provide financial advice related to possible transactions.
Gussin, Docket No. 29-4 at 36. Both financial
advisors provided fairness opinions to the DigitalGlobe board
on February 23, 2017, which were attached to the registration
statement. Id.; Gussin, Docket No. 29-6.
The registration statement also contains a summary of
financial analyses performed by the financial advisors.
Gussin, Docket No. 29-4 at 123-47.
financial advisors' analyses were based, in part, on
non-public information supplied by MDA and Digital Globe,
some of which was later included in the registration
statement. Gussin, Docket No. 29-4 at 123-24,
134-36. In particular, DigitalGlobe management's
financial projections for fiscal years 2017-21 are included.
Id. at 147-50. These projections are based on three
similar scenarios regarding performance of the company's
divisions. Id. The projections are presented in
terms of revenue; earnings before interest, taxes,
depreciation, and amortization (“EBITDA”)
pre-stock based compensation; EBITDA post-stock based
compensation; capital expenditures; levered free cash flow;
and unlevered free cash flow. Id. at 150-51. The
registration statement provides figures to reconcile the
financial measures used in the projections that do not comply
with generally accepted accounting principles
(“non-GAAP”) with financial measures that do
comply with generally accepted accounting principles
(“GAAP”), but only for fiscal year 2017.
Id. at 154-56.
first lawsuit related to the proposed transaction was filed
in this district on May 3, 2017, four business days after the
initial registration statement was filed. Docket No. 1. Three
other cases related to the transaction were later filed in
this district, including Gussin. The complaint in
Zand, however, was filed on May 22, 2017 in the
United States District Court for the District of Delaware.
Zand, Docket No. 2. On June 5, 2017, Zand filed his
motion for a preliminary injunction. Zand, Docket
No. 14. On June 14, 2017, Gussin filed a similar motion.
Gussin, Docket No. 19. The Zand case was
transferred to this Court on June 27, 2017. Zand,
Docket No. 1. On July 6, 2017, the Court ordered the five
then-pending actions consolidated. Docket No. 25. The Court
held a hearing on the preliminary injunction motions on July
preliminary injunction is an extraordinary remedy never
awarded as of right.” Winter v. NRDC, 555 U.S.
7, 24 (2008). “To obtain a preliminary injunction, the
moving party must demonstrate four factors: (1) a likelihood
of success on the merits; (2) a likelihood that the movant
will suffer irreparable harm in the absence of preliminary
relief; (3) that the balance of equities tips in the
movant's favor; and (4) that the injunction is in the
public interest.” RoDa Drilling Co. v. Siegal,
552 F.3d 1203, 1208 (10th Cir. 2009) (citing Winter,
555 U.S. at 20). “Moreover, ‘because a
preliminary injunction is an extraordinary remedy, the right
to relief must be clear and unequivocal.'”
Beltronics USA, Inc. v. Midwest Inventory Distribution,
LLC, 562 F.3d 1067, 1070 (10th Cir. 2009) (quoting
Greater Yellowstone Coal. v. Flowers, 321 F.3d 1250,
1256 (10th Cir. 2003)) (internal quotation marks
Rule 14a-9(a) prohibits “solicitation . . . by means of
any proxy statement . . . containing any statement which, at
the time and in the light of the circumstances under which it
is made, is false or misleading with respect to any material
fact, or which omits to state any material fact necessary in
order to make the statements therein not false or
misleading.” 17 C.F.R. § 240.14a-9(a). To state a
claim under Rule 14a-9, a plaintiff must establish:
“(1) that the proxy contained a material
misrepresentation or omission; (2) that the defendant acted
with the requisite state of mind [negligence], and (3) that
the proxy was the essential link in completing the
transaction in question.” In re Zagg Sec.
Litig., 2014 WL 505152, at *7 (D. Utah Feb. 7, 2014)
(internal quotation marks ...