H.I.G. Capital Acquisition of NCI, Inc. Held Up by Securities Lawsuit

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NCI, Inc. and its board of directors are staring down a proposed class action attempting to call foul on the company’s acquisition by H.I.G. Capital LLC through its subsidiaries Cloud Intermediate Holdings, LLC and Cloud Merger Sub, Inc., who are also named as defendants. At issue in the case, as is common in securities litigation, are allegedly false, misleading and incomplete statements submitted to the US Securities and Exchange Commission.

“The omissions in the Solicitation Statement are material in that a reasonable shareholder will consider them important in deciding whether to tender their shares in connection with the proposed transaction,” the case claims. “In addition, a reasonable investor will view a full and accurate disclosure as significantly altering the total mix of information made available.”

The case claims NCI issued a press release in May 2017 noting its first quarter revenue exceeded management’s previously quoted guidance range by roughly $2 million. Upon this news, NCI’s president and CEO lauded the company’s prospects and anticipated full profitability through the remainder of 2017. The lawsuit alleges that despite a promising future, NCI and its board caused the company to enter into a merger agreement with their co-defendant companies that would see NCI acquired for “inadequate consideration.”

The material allegedly omitted from the aforementioned solicitation statement submitted to regulators includes:

• Information concerning NCI’s financial projections, including analyses performed by Wells Fargo Securities, LLC and Stifel, Nicolaus & Company Incorporated, complete with their fairness opinions; and
• Information regarding potential conflicts of interest of NCI’s financial advisors.