Sigma Designs Accused of Filing Misleading Proxy Concerning Proposed Asset Sale

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Sigma Designs, Inc. and four individual directors have been named in a proposed class action lawsuit alleging the parties filed a misleading proxy statement in connection with the potential sale of the company’s assets. The complaint begins with the background of the transaction, explaining that Sigma failed to meet the conditions of a proposed merger agreement with Silicon Laboratories Inc. These conditions, the case says, included “the sale or shut down of Sigma’s television and set-top box business and the amendment or termination of certain contracts.” The lawsuit notes that the original agreement allowed for the proposed merger to be converted to an asset sale should the company fail to meet the set conditions. Through such a sale, however, shareholders would allegedly receive reduced amounts when compared to those stipulated in the original merger consideration.

The lawsuit explains the defendants filed a proxy statement in order to convince shareholders to vote in support of the asset sale. The proxy, according to the suit, was misleading in that it was missing key information concerning the Sigma’s financial projections and contained a purposely vague description of the non-disclosure agreements provided to other potential buyers.

The complaint adds that the company’s former CEO and president had started a new outfit that had agreed to purchase Sigma’s TV and set-top box business in the sale. “Tellingly,” the lawsuit points out, “this was the portion of Sigma’s business that needed to be sold in order to allow shareholders to receive the full Merger Consideration.”

Because of the timing of this agreement, the case argues, shareholders stood to receive a reduced amount for their shares as compared to the original merger proposal.