As many as five US-based law firms are investigating charges of whether IGATE Board of Directors failed to maximise gains of shareholders before inking the multi-billion dollar deal with French rival Capgemini.
These law firms are reaching out to shareholders and investors of IGATE to join their investigation to ascertain if the company's Board violated their mandate, which if proved could lead to class action law suits against the firm.
Earlier this week, Capgemini agreed to acquire the New Jersey-based company for USD 4 billion in an all cash deal.
The firms -- WeissLaw, Rosen Law Firm, Ryan & Maniskas, Block & Leviton and Faruqi & Faruqi -- are investigating for "possible breaches of fiduciary duty and other violations of law" as well as the fairness with which IGATE Board considered and approved the transaction.
When contacted, IGATE declined to comment on the matter. Fiduciary duty is generally termed as a legal obligation of one party to act in best interests of another.
The obligated party is typically a fiduciary, that is, someone entrusted with the care of money or property. Boston-based law firm Block & Leviton said: "Under the terms of the proposal, Capgemini will acquire each IGATE share for USD 48 in cash, a paltry premium of approximately 4.7 percent.
"Not surprisingly, because it was able to acquire IGATE at such a substantial discount to its true value, shares of Capgemini soared as high as USD 85.77 upon the announcement of the proposed transaction, representing double the premium received by IGATE shareholders."
Market reports have stated that Capgemini has already secured voting power of 54 percent to push the deal through, the firm added.
"This support is likely underpinned by the nearly 26 percent of the company held by Ashok Trivedi and Sunil Wadhwani, the co-founders and co-chairmen of iGATE. "The two co-founders will collect approximately USD 1 billion of the total USD 4 billion in merger consideration expected to be paid in the proposed deal," it added.
The high analyst price target on the investment website Yahoo! Finance was USD 55, about 15 percent higher than the offer price.
The value of the company's shares has increased around 35 percent in just the past four months, it added. WeissLaw LLP, a class action shareholder rights law firm, in a statement said it is investigating "possible breaches of fiduciary duty and other violations of law" by IGATE Board. Under the terms of the agreement, IGATE shareholders will receive USD 48 in cash for each share they own.
"WeissLaw is investigating whether IGATE's Board acted to maximise shareholder value prior to entering into agreement. Notably, the offer price represents a premium of less 5 percent over the company stock's April 24, 2015 trading price of USD 45.93.