`
`UNITED STATES DISTRICT COURT
`DISTRICT OF DELAWARE
`
`
`--------------------------------------------------------
`SHIVA STEIN,
`
`
`Plaintiff,
`
`
`v.
`
`MAGELLAN HEALTH, INC., STEVEN J.
`SHULMAN, SWATI ABBOTT,
`CHRISTOPHER J. CHEN, KEN FASOLA,
`PETER A. FELD, MURAL R. JOSEPHSON,
`SCOTT MACKENZIE, LESLIE V.
`NORWALK, and GUY P. SANSONE.,
`
`
`
`
`
`
`Civil Action No. ______________
`
`
`COMPLAINT FOR VIOLATIONS OF
`SECTIONS 14(a) AND 20(a) OF THE
`SECURITIES EXCHANGE ACT OF
`1934
`
`JURY TRIAL DEMANDED
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`Defendants.
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`Shiva Stein (“Plaintiff”), by and through her attorneys, alleges the following upon
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`information and belief, including investigation of counsel and review of publicly-available
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`information, except as to those allegations pertaining to Plaintiff, which are alleged upon personal
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`knowledge:
`
`1.
`
`This is an action brought by Plaintiff against Magellan Health, Inc. (“Magellan” or
`
`the “Company”) and the members of Magellan’s board of directors (the “Board” or the “Individual
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`Defendants” and collectively with the Company, the “Defendants”) for their violations of Sections
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`14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), in connection with
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`the proposed acquisition of Magellan by Centene Corporation (“Centene”) and Centene’s
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`affiliates.
`
`2.
`
`Defendants have violated the above-referenced sections of the Exchange Act by
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`causing a materially incomplete and misleading Preliminary Proxy Statement on Schedule 14A
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`(the “Proxy Statement”) to be filed on February 8, 2021 with the United States Securities and
`
`
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 2 of 16 PageID #: 2
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`Exchange Commission (“SEC”) and disseminated to the Company’s stockholders. The Proxy
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`Statement recommends that the Company’s stockholders vote in favor of a proposed transaction
`
`whereby Mayflower Merger Sub, Inc. (“Merger Sub”) will merge with and into Magellan, with
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`Magellan surviving the merger and becoming a wholly-owned subsidiary of Centene (the
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`“Proposed Transaction”). Pursuant to the terms of the definitive agreement and plan of merger the
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`companies entered into (the “Merger Agreement”), each Magellan common share issued and
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`outstanding will be converted into the right to receive $95.00 in cash (the “Merger Consideration”).
`
`3.
`
`As discussed below, Defendants have asked Magellan’s stockholders to support the
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`Proposed Transaction based upon the materially incomplete and misleading representations and
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`information contained in the Proxy Statement, in violation of Sections 14(a) and 20(a) of the
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`Exchange Act. Specifically, the Proxy Statement contains materially incomplete and misleading
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`information concerning the Company’s financial forecasts and financial analyses conducted by the
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`financial advisors of the Company, Goldman Sachs & Co. LLC (“Goldman Sachs”) and
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`Guggenheim Securities, LLC (“Guggenheim”), in support of their fairness opinions, and relied
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`upon by the Board in recommending the Company’s stockholders vote in favor of the Proposed
`
`Transaction.
`
`4.
`
`It is imperative that the material information that has been omitted from the Proxy
`
`Statement is disclosed to the Company’s stockholders prior to the forthcoming stockholder vote
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`so that they can properly exercise their corporate suffrage rights.
`
`5.
`
`For these reasons and as set forth in detail herein, Plaintiff seeks to enjoin
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`Defendants from taking any steps to consummate the Proposed Transaction unless and until the
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`material information discussed below is disclosed to Magellan’s stockholders or, in the event the
`
`2
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`
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 3 of 16 PageID #: 3
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`Proposed Transaction is consummated, to recover damages resulting from the Defendants’
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`violations of the Exchange Act.
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`JURISDICTION AND VENUE
`
`6.
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`This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
`
`Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges
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`violations of Section 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9.
`
`7.
`
`Personal jurisdiction exists over each Defendant either because the Defendant
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`conducts business in or maintains operations in this District, or is an individual who is either
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`present in this District for jurisdictional purposes or has sufficient minimum contacts with this
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`District as to render the exercise of jurisdiction over defendant by this Court permissible under
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`traditional notions of fair play and substantial justice.
`
`8.
`
`Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C. §
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`78aa, as well as under 28 U.S.C. § 1391, because Magellan in incorporated in this District.
`
`PARTIES
`
`9.
`
`Plaintiff is, and has been at all relevant times, the owner of Magellan common stock
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`and has held such stock since prior to the wrongs complained of herein.
`
`10.
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`Individual Defendant Steven J. Shulman has served as a member of the Board since
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`2019 and is the Chairman of the Board.
`
`11.
`
`Individual Defendant Swati Abbott has served as a member of the Board since
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`2018.
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`12.
`
`Individual Defendant Christopher J. Chen has served as a member of the Board
`
`since 2020.
`
`13.
`
`Individual Defendant Ken Fasola has served as a member of the Board since 2019
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`and is the Company’s Chief Executive Officer.
`
`3
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 4 of 16 PageID #: 4
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`14.
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`Individual Defendant Peter A. Feld has served as a member of the Board since
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`2019.
`
`15.
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`Individual Defendant Mural R. Josephson has served as a member of the Board
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`since 2020.
`
`16.
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`Individual Defendant Scott MacKenzie has served as a member of the Board since
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`2016.
`
`2019.
`
`2019.
`
`17.
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`Individual Defendant Leslie V. Norwalk has served as a member of the Board since
`
`18.
`
`Individual Defendant Guy P. Sansone has served as a member of the Board since
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`19.
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`Defendant Magellan is incorporated in Delaware and maintains its principal offices
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`at 4801 E. Washington Street, Phoenix, Arizona 85034. The Company’s common stock trades on
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`the NASDAQ Stock Exchange under the symbol “MGLN.”
`
`20.
`
`The defendants identified in paragraphs 10-18 are collectively referred to as the
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`“Individual Defendants” or the “Board.”
`
`21.
`
`The defendants identified in paragraphs 10-19 are collectively referred to as the
`
`“Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`A.
`
`The Proposed Transaction
`
`22. Magellan, together with its subsidiaries, provides healthcare management services
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`in the United States. The Company operates in Healthcare and Pharmacy Management segments.
`
`The Healthcare segment offers carve-out management services for behavioral health; employee
`
`assistance plans (EAP); and other areas of specialty healthcare, including diagnostic imaging,
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`musculoskeletal management, cardiac, and physical medicine. It also contracts with state
`
`4
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 5 of 16 PageID #: 5
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`Medicaid agencies, and the centers for Medicare and Medicaid services to manage care for
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`beneficiaries under Medicaid and Medicare programs, such as healthcare and long-term support
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`services through its network of medical and behavioral health professionals, clinics, hospitals,
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`nursing facilities, home care agencies, and ancillary service providers. The Pharmacy
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`Management segment comprises products and solutions that provide clinical and financial
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`management of pharmaceuticals paid under medical and pharmacy benefit programs. Further, it
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`offers pharmacy benefit management services, such as pharmaceutical dispensing services;
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`pharmacy benefit administration for state Medicaid and other government sponsored programs;
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`clinical and formulary management programs; medical pharmacy management programs; and
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`programs for the integrated management of specialty drugs that treat complex conditions. In
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`addition, the company provides services to health plans and other managed care organizations,
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`employers, labor unions, various military and governmental agencies, and third party
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`administrators. Magellan was incorporated in 1969 and is headquartered in Phoenix, Arizona.
`
`23.
`
`On January 4, 2021, Magellan and Centene jointly announced that they had entered
`
`into a proposed transaction:
`
`ST. LOUIS and PHOENIX, Jan. 4, 2021 /PRNewswire/ -- Centene Corporation
`(NYSE: CNC) and Magellan Health, Inc. (NASDAQ: MGLN) today announced
`that they have entered into a definitive merger agreement under which Centene will
`acquire Magellan Health for $95 per share in cash for a total enterprise value
`of $2.2 billion. The transaction, which was unanimously approved by the Boards
`of Directors of both companies, will broaden and deepen Centene’s whole health
`capabilities and establish a leading behavioral health platform. The combined
`platform lays the foundation by which the company will continue to invest and
`innovate for its members, enabling improved health outcomes and faster,
`diversified growth.
`The combination brings together the companies’ complementary capabilities in
`behavioral health, specialty healthcare and pharmacy management. As a result of
`the transaction, Centene will establish one of the nation’s largest behavioral health
`platforms across 41 million unique members with enhanced capabilities to deliver
`better health outcomes for complex, high-cost populations. Magellan Health will
`also add to Centene’s leadership in government sponsored healthcare, bringing 5.5
`
`5
`
`
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 6 of 16 PageID #: 6
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`million new members on government-sponsored plans. Magellan Health also
`provides specialty health services for 18 million third-party customer members in
`addition to Centene’s own members. Furthermore, the transaction adds 2 million
`PBM members and 16 million medical pharmacy members, enhancing the scale of
`Centene’s pharmacy platform with leading capabilities in specialty drug
`management. As part of Centene’s Health Care Enterprises, Magellan Health will
`continue to independently support its existing customers and pursue growth
`opportunities. In addition, the transaction will create attractive shareholder returns
`through enhanced service capabilities, cross-sell opportunities and increased
`engagement with third-party customers.
`“There is a critical need for a fundamentally better approach to supporting people
`with complex, chronic conditions through better integration of physical and mental
`health care. This has become even more evident in light of the pandemic which has
`driven a dramatic rise in behavioral health needs,” said Michael F. Neidorff,
`Chairman, President and Chief Executive Officer of Centene. “This acquisition
`accelerates our diversification strategy and enhances our ability to build next
`generation capabilities in our specialty care business by leveraging our scale and
`investments in technology. Furthermore, we are very familiar with the range of
`Magellan Health’s healthcare solutions as we have been one of their customers over
`many years, and our shared commitment to taking care of the most vulnerable
`populations makes this transaction a natural step.”
`
`“We’re thrilled to bring together two businesses with complementary capabilities
`and a shared commitment to driving higher quality care for our members while
`lowering overall healthcare costs,” said Kenneth J. Fasola, Chief Executive Officer
`of Magellan Health. “By joining Centene under the Health Care Enterprises
`umbrella, we will maintain the independence necessary to ensure continued service
`to our third-party customers while accelerating the introduction of innovative
`solutions and reimagining behavioral health. I look forward to continuing to lead
`Magellan Health as we create exciting new opportunities for our customers and
`employees who will benefit from the creation of a best-in-class platform that meets
`our members’ needs today and in the future.”
`
`Strategic and Financial Benefits of the Transaction:
`
`• Broadening and deepening Centene’s whole health capabilities at a critical
`time: the acquisition increases Centene’s scale and capability in behavioral care at
`a time when more than 2 in 5 Americans are struggling with mental or behavioral
`health issues associated with the COVID-19 pandemic.1 In addition, the sickest 5%
`of the population consume 50% of healthcare spending and Magellan Health’s
`behavioral health, specialty health and pharmacy offerings focus on the portion of
`this spend that is addressable.2
`
`• Advancing Centene’s specialty care and Health Care Enterprises platforms:
`the transaction brings additional scale in the company’s growing specialty care
`division and complements Centene’s evolving Health Care Enterprises portfolio,
`
`6
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`
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 7 of 16 PageID #: 7
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`aligned with delivering the latest technologies and services across the full spectrum
`of its members.
`
`• Enabling better health outcomes at lower total medical costs: by combining
`both companies’ capabilities in behavioral health and specialty healthcare, the
`acquisition enables more integrated solutions across physical and mental health to
`deliver better health outcomes at lower costs for complex, high-cost populations.
`
`• Value creation for shareholders:
`the acquisition will create attractive
`opportunities to grow Centene’s specialty care business with enhanced services,
`new product development and additional third party relationships. Centene expects
`the transaction to be slightly accretive in the first full year and deliver low to mid-
`single digit percent adjusted EPS accretion from the transaction by the second full
`year, including approximately $50 million in annual net cost synergies projected by
`the second full year. The net synergies are in addition to the cost reduction plan
`of $75 million already initiated by Magellan Health.
`
`Organization and Leadership
`
`Ken Fasola, CEO of Magellan Health, and other members of Magellan Health’s
`leadership team have agreed to join Centene to provide continuity to Magellan
`Health’s strategy and leadership.
`
`Timing and Required Approvals
`
`The transaction is subject to clearance under the Hart-Scott Rodino Act, receipt of
`required state regulatory approvals, the approval of the definitive merger agreement
`by Magellan Health’s stockholders and other customary closing conditions. In
`connection with the transaction, affiliates of Starboard Value LP, which own
`approximately 9.4% of Magellan Health’s outstanding shares of common stock in
`the aggregate, have entered into a merger support agreement whereby they have
`agreed to vote their shares in favor of the transaction at Magellan Health’s special
`meeting.
`
`The transaction is not contingent upon financing. Centene intends to primarily fund
`the cash portion of the acquisition through debt financing, and J.P. Morgan has
`provided a $2.381 billion bridge financing commitment. Upon closing, Centene
`expects its debt-to-capital ratio to be in the low 40% range, and intends to use its
`strong earnings and cash flows to achieve its targeted debt-to-capital ratio in the
`upper 30% range within 12 to 18 months post close.
`
`Centene and Magellan Health expect to complete the transaction in the second half
`of 2021.
`
`7
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 8 of 16 PageID #: 8
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`Advisors
`
`Allen & Company LLC, J.P. Morgan Securities LLC and Barclays are serving as
`financial advisors to Centene, and Skadden, Arps, Slate, Meagher & Flom LLP is
`serving as its legal counsel. Goldman Sachs & Co. LLC and Guggenheim
`Securities, LLC are serving as financial advisors to Magellan Health, and Weil,
`Gotshal & Manges LLP is serving as its legal counsel.
`
`24.
`
`The Board has unanimously approved the Proposed Transaction. It is therefore
`
`imperative that Magellan’s stockholders are provided with the material information that has been
`
`omitted from the Proxy Statement, so that they can meaningfully assess whether or not the
`
`Proposed Transaction is in their best interests prior to the forthcoming stockholder vote.
`
`B.
`
`The Materially Incomplete and Misleading Proxy Statement
`
`25.
`
`On February 8, 2021, Magellan filed the Proxy Statement with the SEC in
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`connection with the Proposed Transaction. The Proxy Statement was furnished to the Company’s
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`stockholders and solicits the stockholders to vote in favor of the Proposed Transaction. The
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`Individual Defendants were obligated to carefully review the Proxy Statement before it was filed
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`with the SEC and disseminated to the Company’s stockholders to ensure that it did not contain any
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`material misrepresentations or omissions. However, the Proxy Statement misrepresents and/or
`
`omits material information that is necessary for the Company’s stockholders to make an informed
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`decision concerning whether to vote in favor of the Proposed Transaction, in violation of Sections
`
`14(a) and 20(a) of the Exchange Act.
`
`Omissions and/or Material Misrepresentations Concerning Magellan Financial Projections
`
`
`26.
`
`The Proxy Statement fails to provide material information concerning financial
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`projections by Magellan management and relied upon by Goldman Sachs and Guggenheim in their
`
`analyses. The Proxy Statement discloses management-prepared financial projections for the
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`Company which are materially misleading. The Proxy Statement indicates that in connection with
`
`the rendering of its fairness opinion, the Company prepared certain non-public financial forecasts
`
`8
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 9 of 16 PageID #: 9
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`(the “Company Projections”) and provided them to the Board and the financial advisors with
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`forming a view about the stand-alone valuation of the Company. Accordingly, the Proxy
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`Statement should have, but fails to provide, certain information in the projections that Magellan
`
`management provided to the Board and the financial advisors. Courts have uniformly stated that
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`“projections … are probably among the most highly-prized disclosures by investors. Investors can
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`come up with their own estimates of discount rates or [] market multiples. What they cannot hope
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`to do is replicate management’s inside view of the company’s prospects.” In re Netsmart Techs.,
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`Inc. S’holders Litig., 924 A.2d 171, 201-203 (Del. Ch. 2007).
`
`27.
`
`The Proxy Statement provides values for non-GAAP (Generally Accepted
`
`Accounting Principles) financial metrics: Segment Profit, EBITDA, Adjusted EPS, and Unlevered
`
`Free Cash Flow, but fails to provide line items used to calculate these metrics and/or a
`
`reconciliation of these non-GAAP metrics to their most comparable GAAP measures, in direct
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`violation of Regulation G and consequently Section 14(a).
`
`28. When a company discloses non-GAAP financial measures in a proxy statement that
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`were relied on by a board of directors to recommend that stockholders exercise their corporate
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`suffrage rights in a particular manner, the company must, pursuant to SEC regulatory mandates,
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`also disclose all projections and information necessary to make the non-GAAP measures not
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`misleading, and must provide a reconciliation (by schedule or other clearly understandable
`
`method) of the differences between the non-GAAP financial measure disclosed or released with
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`the most comparable financial measure or measures calculated and presented in accordance with
`
`GAAP. 17 C.F.R. § 244.100.
`
`29.
`
`The SEC has noted that:
`
`companies should be aware that this measure does not have a
`uniform definition and its title does not describe how it is calculated.
`
`9
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 10 of 16 PageID #: 10
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`Accordingly, a clear description of how this measure is calculated,
`as well as the necessary reconciliation, should accompany the
`measure where
`it
`is used. Companies should also avoid
`inappropriate or potentially misleading
`inferences about
`its
`usefulness. For example, “free cash flow” should not be used in a
`manner that inappropriately implies that the measure represents the
`residual cash flow available for discretionary expenditures, since
`many companies have mandatory debt service requirements or other
`non-discretionary expenditures that are not deducted from the
`measure.1
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`Thus, to cure the Proxy Statement and the materially misleading nature of the
`
`30.
`
`forecasts under SEC Rule 14a-9 as a result of the omitted information in the Proxy Statement,
`
`Defendants must provide a reconciliation table of the non-GAAP measures to the most comparable
`
`GAAP measures to make the non-GAAP metrics included in the Proxy Statement not misleading.
`
`31. With respect to Goldman Sachs’ Illustrative Discounted Cash Flow Analysis for
`
`the Company, the Proxy Statement fails to disclose: (i) the terminal values calculated for the
`
`Company; (ii) the inputs and assumptions underlying the range of discount rates ranging from
`
`7.0% to 8.0%, (iii) the inputs and assumptions underlying the use of terminal year EBITDA exit
`
`multiples ranging from 6.5x to 8x; (iv) the inputs and assumptions underlying the use of the range
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`of perpetuity growth rates from negative 0.6% to 1.7%; (v) Company-specific inputs used to derive
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`the discount rates, including the Company’s target capital structure weightings, the cost of long-
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`term debt, future applicable marginal cash tax rate and a beta for the Company; (vi) the historical
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`NTM enterprise value/EBITDA multiples for the Company over the past five years; (vii) net
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`proceeds from the MCC Business Sale and collections in November 2020 stemming from the
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`Company’s wind down of its Medicare Part D prescription drug plan and the impact of the
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`investments made by the Company in December 2020; (viii) the Company’s net debt as of
`
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`1 U.S. Securities and Exchange Commission, Non-GAAP Financial Measures, last updated April
`4, 2018, available at: https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm.
`
`10
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 11 of 16 PageID #: 11
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`September 30, 2020; (ix) the Company’s unrestricted cash and short term investments balance as
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`of September 30, 2020; and (x) the number of the fully diluted shares of Magellan common stock
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`as of December 28, 2020.
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`32. With respect to Goldman Sachs’ Illustrative Present Value of Future Share Price
`
`Analysis for the Company, the Proxy Statement fails to disclose: (i) the inputs and assumptions
`
`underlying the use of the range of illustrative NTM P/E multiples from 16.0x to 24.0x; and (ii) the
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`inputs and assumptions underlying the discount rate of 8.5%.
`
`33. With respect to Goldman Sachs’ Premia Paid Analysis, the Proxy Statement fails
`
`to disclose: the premia and the transactions observed by Goldman Sachs.
`
`34. With respect to Goldman Sachs’ Selected Precedent Transactions Analysis for the
`
`Company, the Proxy Statement fails to disclose (i) the transaction value of each transaction
`
`observed by Goldman Sachs; and (ii) the dates of the closings of each transaction observed by
`
`Goldman Sachs.
`
`35. With respect to Guggenheim’s Discounted Cash Flow Analysis for the Company,
`
`the Proxy Statement fails to disclose: (i) the terminal values calculated for the Company; (ii) the
`
`inputs and assumptions underlying the range of discount rates ranging from 7.5% to 8.5%, (iii) the
`
`inputs and assumptions underlying the use of the range of perpetuity growth rates from 1.0% to
`
`2.0%; and (iv) Company-specific inputs used to derive the discount rates, including the Company’s
`
`forward-looking equity beta reference range, the Company’s assumed forward-looking capital
`
`structure and the corresponding blended cost of debt, the Company’s prospective marginal cash
`
`income tax rate, and the appropriate size/liquidity premium for the Company.
`
`36. With respect to Guggenheim’s Selected Precedent Merger and Acquisition
`
`Transactions Analysis for the Company, the Proxy Statement fails to disclose (i) the transaction
`
`11
`
`
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 12 of 16 PageID #: 12
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`value of each transaction observed by Guggenheim; (ii) the dates of the closings of each transaction
`
`observed by Guggenheim; and (iii) the inputs and assumptions to derive the transaction enterprise
`
`value/NTM EBITDA multiple of 9.0x – 11.0x.
`
`37. With respect to Guggenheim’s Selected Publicly Traded Companies Analysis, the
`
`Proxy Statement fails to disclose the inputs and assumptions to derive the reference range of
`
`trading price/adjusted earnings per share multiple of 13.0x – 18.0x.
`
`38. With respect to Guggenheim’s Wall Street Equity Research Analyst Stock Price
`
`Targets analysis, the Proxy Statement fails to disclose the Wall Street equity research analyst noted
`
`by Guggenheim and the selected stock price targets for the Company.
`
`39.
`
`In sum, the omission of the above-referenced information renders statements in the
`
`Proxy Statement materially incomplete and misleading in contravention of the Exchange Act.
`
`Absent disclosure of the foregoing material information prior to the special stockholder meeting
`
`to vote on the Proposed Transaction, Plaintiff will be unable to make a fully-informed decision
`
`regarding whether to vote in favor of the Proposed Transaction, and she is thus threatened with
`
`irreparable harm, warranting the injunctive relief sought herein.
`
`CLAIMS FOR RELIEF
`
`COUNT I
`
`On Behalf of Plaintiff Against All Defendants for Violations of
`Section 14(a) of the Exchange Act and Rule 14a-9 and 17 C.F.R. § 244.100
`
`40.
`
`Plaintiff incorporates each and every allegation set forth above as if fully set forth
`
`
`
`herein.
`
`41.
`
`Rule 14a-9, promulgated by the SEC pursuant to Section 14(a) of the Exchange
`
`Act, provides that proxy communications with stockholders shall not contain “any statement
`
`which, at the time and in the light of the circumstances under which it is made, is false or
`
`12
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`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.
`
`42.
`
`Defendants have issued the Proxy Statement with the intention of soliciting
`
`stockholder support for the Proposed Transaction. Each of the Defendants reviewed and
`
`authorized the dissemination of the Proxy Statement and the use of their name in the Proxy
`
`Statement, which fails to provide critical information regarding, among other things, financial
`
`analyses that were prepared by Goldman Sachs and Guggenheim and relied upon by the Board in
`
`recommending the Company’s stockholders vote in favor of the Proposed Transaction.
`
`43.
`
`In so doing, Defendants made untrue statements of fact and/or omitted material
`
`facts necessary to make the statements made not misleading. Each of the Individual Defendants,
`
`by virtue of their roles as officers and/or directors, were aware of the omitted information but failed
`
`to disclose such information, in violation of Section 14(a). The Individual Defendants were
`
`therefore negligent, as they had reasonable grounds to believe material facts existed that were
`
`misstated or omitted from the Proxy Statement, but nonetheless failed to obtain and disclose such
`
`information to stockholders although they could have done so without extraordinary effort.
`
`44.
`
`Defendants were, at the very least, negligent in preparing and reviewing the Proxy
`
`Statement. The preparation of a Proxy Statement by corporate insiders containing materially false
`
`or misleading statements or omitting a material fact constitutes negligence. Defendants were
`
`negligent in choosing to omit material information from the Proxy Statement or failing to notice
`
`the material omissions in the Proxy Statement upon reviewing it, which they were required to do
`
`carefully. Indeed, Defendants were intricately involved in the process leading up to the signing of
`
`the Merger Agreement and the preparation and review of strategic alternatives and the Company’s
`
`financial projections.
`
`13
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 14 of 16 PageID #: 14
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`45.
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`The misrepresentations and omissions in the Proxy Statement are material to
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`Plaintiff, who will be deprived of her right to cast an informed vote if such misrepresentations and
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`omissions are not corrected prior to the vote on the Proposed Transaction. Plaintiff has no adequate
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`remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff be fully
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`protected from the immediate and irreparable injury that Defendants’ actions threaten to inflict.
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`COUNT II
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`On Behalf of Plaintiff Against the Individual Defendants for Violations of Section 20(a) of
`the Exchange Act
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`Plaintiff incorporates each and every allegation set forth above as if fully set forth
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`46.
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`herein.
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`47.
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`The Individual Defendants acted as controlling persons of Magellan within the
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`meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their positions as
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`directors of Magellan, and participation in and/or awareness of the Company’s operations and/or
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`intimate knowledge of the incomplete and misleading statements contained in the Proxy Statement
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`filed with the SEC, they had the power to influence and control and did influence and control,
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`directly or indirectly, the decision making of Magellan, including the content and dissemination
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`of the various statements that Plaintiff contends are materially incomplete and misleading.
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`48.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Proxy Statement and other statements alleged by Plaintiff to be misleading prior to
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`and/or shortly after these statements were issued and had the ability to prevent the issuance of the
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`statements or cause the statements to be corrected.
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`49.
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`In particular, each of the Individual Defendants had direct and supervisory
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`involvement in the day-to-day operations of Magellan, and, therefore, is presumed to have had the
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`power to control or influence the particular transactions giving rise to the Exchange Act violations
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`14
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`Case 1:21-cv-00185-UNA Document 1 Filed 02/10/21 Page 15 of 16 PageID #: 15
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`alleged herein, and exercised the same. The omitted information identified above was reviewed
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`by the Board prior to voting on the Proposed Transaction. The Proxy Statement at issue contains
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`the unanimous recommendation of the Board to approve the Proposed Transaction. The Individual
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`Defendants were thus directly involved in the making of the Proxy Statement.
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`50.
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`In addition, as the Proxy Statement sets forth at length, and as described herein, the
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`Individual Defendants were involved in negotiating, reviewing, and approving the Merger
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`Agreement. The Proxy Statement purports to describe the various issues and information that the
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`Individual Defendants reviewed and considered. The Individual Defendants participated in
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`drafting and/or gave their input on the content of those descriptions.
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`51.
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`By virtue of the foregoing, the Individual Defendants have violated Section 20(a)
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`of the Exchange Act.
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`52.
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`As set forth above, the Individual Defendants had the ability to exercise control
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`over and did control a person or persons who have each violated Section 14(a) and Rule 14a-9, by
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`their acts and omissions as alleged herein. By virtue of their positions as controlling persons, these
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`defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate
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`result of Individual Defendants’ conduct, Plaintiff will be irreparably harmed.
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`53.
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`Plaintiff has no adequate remedy at law. Only through the exercise of this Court’s
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`equitable powers can Plaintiff be fully protected from the immediate and irreparable injury that
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`Defendants’ actions threaten to inflict.
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`RELIEF REQUESTED
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`WHEREFORE, Plaintiff demands injunctive relief in her favor and against the Defendants
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`jointly and severally, as follows:
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`A.
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`Preliminarily and permanently enjoining Defendants and their counsel, agents,
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`employees and all persons acting under, in concert with, or for them, from proceeding with,
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`15
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