December 26, 2000 3:35 PM PST

Shareholder sues Netpliance over plan to go private

Shareholders have reacted quickly and angrily to a bid by Netpliance executives to take the company private, with at least one stockholder filing suit to block the proposed deal.

Donald Semone filed a class-action lawsuit Tuesday in Delaware Chancery Court, seeking an injunction to stop Netpliance executives from proceeding with a management-led buyout announced Friday. An investor group led by Netpliance chief executive John McHale and representing 52 percent of the company's shareholders has proposed an offer of 65 cents per share for shares not owned by those in the buyout group.

A second lawsuit was filed late Tuesday against Netpliance in the same court. However, details were not immediately available.

Netpliance's stock closed at 34 cents Thursday, the day before the deal was announced. But it traded as high as $26.12 after an initial public offering in March at $18.

As Web-based message boards filled with angry comments from investors who paid far more than 65 cents for Netpliance shares, Semone took to the courts to sue Netpliance as well as McHale, company president Kent Savage, and directors Paul Zito, Michael Corboy, Steven Papermaster and James Mansour. McHale and Savage also sit on the company's board; McHale serves as chairman.

Semone asks the court to declare the offer unfair and to halt the company and the directors from taking "any steps to accomplish or implement the proposed transaction" unless adequate safeguards are put in place to protect minority shareholders.

"The proposed transaction is wrongful, unfair and harmful to Netpliance's public stockholders...and represents an attempt by Netpliance to subvert the interests of the public shareholders, in order to aggrandize its own interests," the lawsuit charges.

Bruce Murphy, Semone's Vero Beach, Fla.-based lawyer, declined to comment on the action. The suit did not say where Semone lives or how many shares he owns.

A Netpliance representative had no immediate comment.

Netpliance is best known for pioneering the I-opener, a Web-surfing appliance. However, the company said last month that it will get out of the business of selling the I-opener itself. Netpliance instead wants to focus on helping Internet service providers sell and manage I-openers and other Internet devices.

On Friday, Netpliance said it will form a committee of independent directors who are not part of the buyout group to evaluate the offer on behalf of shareholders. The lawsuit contests the notion that the committee will fairly represent the shareholders who are not part of the buyout group.

"Even if Netpliance forms a committee of unaffiliated directors to consider the proposal (as it has proposed), such a committee cannot effectively and independently represent and advocate the interest of the minority shareholders in the face of defendant McHale's and the investor group's domination and control," the lawsuit states.

 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.