Case 1:22-cv-05111 Document 1 Filed 06/17/22 Page 1 of 13
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`Plaintiff,
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`
`
`Civil Action No. ___________
`
`
`COMPLAINT FOR VIOLATIONS
`OF THE SECURITIES EXCHANGE
`ACT OF 1934
`
`
`
`
`JURY TRIAL DEMAND
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`
`
`JOHN RYAN,
`
`
`
`
` v.
`
`NATUS MEDICAL INCORPORATED,
`THOMAS J. SULLIVAN, JOSHUA H.
`LEVINE, ILAN DASKAL, ERIC J. GUERIN,
`LISA WIPPERMAN HEINE, BRYANT M.
`MOORE, and ALICE D. SCHROEDER,
`
`
`Defendants.
`
`
`
`Plaintiff John Ryan (“Plaintiff”) alleges the following upon information and belief,
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`including investigation of counsel and review of publicly available information, except as to those
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`allegations pertaining to Plaintiff, which are alleged upon personal knowledge:
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`NATURE OF THE ACTION
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`1.
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`Plaintiff brings this action against Natus Medical Incorporated (“Natus” or the
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`“Company”) and Natus’ Board of Directors (the “Board” or the “Individual Defendants”) for their
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`violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78n(a),
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`78t(a), and SEC Rule 14a-9, 17 C.F.R. § 240.14a-9, arising out of the Board’s attempt to sell the
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`Company to ArchiMed SAS through its affiliates, Prince Parent Inc. and Prince Mergerco Inc.
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`(collectively “ArchiMed”).
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`2.
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`Defendants have violated the above-referenced Sections of the Exchange Act by
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`causing a materially incomplete and misleading definitive proxy statement (the “Proxy”) to be
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`filed with the Securities and Exchange Commission (“SEC”) on June 2, 2022. The Proxy
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`recommends that Natus stockholders vote in favor of a proposed transaction (the “Proposed
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`Transaction”) whereby Natus is acquired by ArchiMed. The Proposed Transaction was first
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`Case 1:22-cv-05111 Document 1 Filed 06/17/22 Page 2 of 13
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`disclosed on April 18, 2022, when Natus announced that they had entered into a definitive merger
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`agreement (the “Merger Agreement”) pursuant to which ArchiMed will acquire all of the
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`outstanding shares of common stock of Natus for $33.50 per share (the “Merger Consideration”).
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`The deal is valued at approximately $ 1.2 billion and is expected to close in the third quarter of
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`2022.
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`3.
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`The Proxy is materially incomplete and contains misleading representations and
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`information in violation of Sections 14(a) and 20(a) of the Exchange Act. Specifically, the Proxy
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`contains materially incomplete and misleading information concerning the financial projections
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`prepared by Natus management, the financial analyses conducted by Stifel, Nicolaus & Company,
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`Incorporated (“Stifel”), Natus’ financial advisor, as well as potential conflicts of interest faced by
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`Company insiders.
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`4.
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`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, including filing an
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`amendment to the Proxy with the SEC or otherwise causing an amendment to the Proxy to be
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`disseminated to Natus’ stockholders, unless and until the material information discussed below is
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`included in any such amendment or otherwise disseminated to Natus’ stockholders. In the event
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`the Proposed Transaction is consummated without the material omissions referenced below being
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`remedied, Plaintiff seeks to recover damages resulting from the Defendants’ violations.
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`5.
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`Plaintiff is, and has been at all relevant times, the owner of shares of common stock
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`PARTIES
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`of Natus.
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`6.
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`Defendant Natus is a corporation organized and existing under the laws of the State
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`of Delaware. The Company’s principal executive offices are located at 3150 Pleasant View Road,
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`Case 1:22-cv-05111 Document 1 Filed 06/17/22 Page 3 of 13
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`Middleton, Wisconsin 53562. Natus common stock trades on the Nasdaq Global Select Market
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`under the ticker symbol “NTUS.”
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`7.
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`Defendant Thomas J. Sullivan has been a director of the Company since 2019.
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`Defendant Sullivan has served as President and CEO of the Company since December 2021.
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`8.
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`Defendant Joshua H. Levine has been a director of the Company since 2018.
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`Defendant Levine serves as Chairperson of the Board.
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`Defendant Ilan Daskal has been a director of the Company since 2020.
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`Defendant Eric J. Guerin has been a director of the Company since 2021.
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`Defendant Lisa Wipperman Heine has been a director of the Company since 2018.
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`Defendant Bryant M. Moore has been a director of the Company since 2021.
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`Defendant Alice D. Schroeder has been a director of the Company since 2019.
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`Nonparty ArchiMed is an investment management firm headquartered in Lyon,
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`9.
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`10.
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`11.
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`12.
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`13.
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`14.
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`France.
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`15.
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`Nonparties Prince Parent Inc. and Prince Mergerco Inc. are legal entities formed by
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`funds managed by ArchiMed to facilitate its acquisition of Natus.
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` JURISDICTION AND VENUE
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`16.
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`This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
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`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.
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`17.
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`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 present
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`in this District for jurisdictional purposes or has sufficient minimum contacts with this District as
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`to render the exercise of jurisdiction over Defendant by this Court permissible under traditional
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`notions of fair play and substantial justice.
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`18.
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`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 a significant amount of the conduct at issue took
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`place and had an effect in this District.
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`FURTHER SUBSTANTIVE ALLEGATIONS
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`A. Background of the Company and the Proposed Transaction
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`19.
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`Natus is a provider of solutions to screen, diagnose, and treat disorders affecting
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`the brain, neural pathways, and eight sensory nervous systems. The Company offers hardware,
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`advanced software and algorithms, and consumables that provide stimulus, acquire and monitor
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`physiological signals, and capture the body’s response. It has sales in over 100 countries, and offers
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`neurodiagnostics, pediatric retinal imaging, and infant hearing screening, as well as a hearing
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`assessment, hearing instrument fitting, balance, and intracranial pressure monitoring.
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`20.
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`On April 17, 2022, the Company entered into the Merger Agreement with
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`ArchiMed.
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`21.
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`According to the press release issued on April 18, 2022, announcing the Proposed
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`Transaction:
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`Natus Medical Incorporated to be acquired by ArchiMed Group for $33.50
`per share in cash
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`Highlights:
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` •
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`
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`Transaction values Natus Medical, Incorporated at approximately $1.2
`billion total equity value
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`•
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`Pre-announces preliminary financial results for the first quarter ended
`March 31, 2022
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`MIDDLETON, Wis., April 18, 2022 (GLOBE NEWSWIRE) -- Natus Medical
`Incorporated (NASDAQ: NTUS), (the “Company” or “Natus”), a leading
`provider of medical device solutions to screen, diagnose, and treat disorders
`affecting the brain, neural pathways, and eight sensory nervous systems, announced
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`today that it has entered into a definitive agreement to be acquired by an affiliate of
`ArchiMed (“ArchiMed”), a leading investment firm focused exclusively on the
`healthcare industry for approximately $1.2 billion. Under the terms of the
`agreement, Natus shareholders will receive $33.50 in cash for each share of Natus
`common stock, representing a 29% premium to the closing price of the Company’s
`common stock on April 14, 2022.
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`“The sale of Natus to ArchiMed will provide our shareholders with immediate and
`substantial cash value, as well as a compelling premium, and the Board has
`unanimously agreed that this transaction is in the best interests of our shareholders,”
`said Joshua H. Levine, Chairman of Natus.
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`“Our nearly 1,400 Natus Teammates remain committed to advance the standard of
`care and improve outcomes and quality of life for patients affected by disorders of
`the brain, neural pathways, and eight sensory nervous systems,” said Thomas J.
`Sullivan, President & Chief Executive Officer of Natus Medical, Incorporated.
`“ArchiMed’s mix of operational, medical, scientific and financial expertise will
`help us continue our mission to serve our customers while delivering immediate
`value to shareholders.”
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`Under the terms of the agreement, Natus shareholders will receive $33.50 in cash
`for each share of Natus common stock they own. The transaction has fully
`committed equity financing from funds affiliated with ArchiMed and fully
`committed debt financing, and there are no financing conditions associated with the
`transaction.
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`Natus’s Board of Directors has unanimously approved the merger agreement with
`ArchiMed and recommends that Natus’s shareholders adopt the merger agreement.
`In connection with the transaction, the Company will prepare a proxy statement to
`be filed with the U.S. Securities and Exchange Commission (“SEC”). Following
`any review by the SEC, a definitive proxy statement will be mailed to shareholders
`of Natus. Natus expects to hold a Special Meeting of Shareholders to consider and
`vote on the proposed merger and the merger agreement as soon as practicable after
`the mailing of the proxy statement. The transaction is expected to close in the third
`quarter of 2022, subject to customary closing conditions, including approval by
`Natus shareholders and receipt of regulatory approvals. Upon completion of the
`transaction, Natus will become a private company and Natus shares will no longer
`be listed on any public market.
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`Under the terms of the merger agreement, Natus may solicit proposals from third
`parties for a period of 30 days continuing through May 17, 2022, and in certain
`cases for a period of 35 days continuing through May 22, 2022. In addition, Natus
`may, at any time prior to receipt of shareholder approval, subject to the provisions
`of the merger agreement, respond to unsolicited proposals that constitute or would
`reasonably be expected to lead to a superior proposal. Natus will have the right to
`terminate the merger agreement with ArchiMed to enter into a superior proposal
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`subject to the terms and conditions of such agreement, including payment of a
`customary termination fee. There can be no assurance that the solicitation process
`will result in a superior proposal or that any other transaction will be approved or
`completed. Natus does not intend to disclose developments with respect to this
`solicitation process unless and until its Board of Directors determines such
`disclosure is appropriate or is otherwise required.
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`B. The Materially Incomplete and Misleading Proxy
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`22.
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`On June 2, 2022, Defendants filed the Proxy with the SEC. The purpose of the
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`Proxy is, inter alia, to provide the Company’s stockholders with all material information necessary
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`for them to make an informed decision on whether to vote in favor of the Proposed Transaction.
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`However, significant and material facts were not provided to Plaintiff. Without such information,
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`Plaintiff cannot make a fully informed decision concerning whether to vote in favor of the
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`Proposed Transaction.
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`Materially Incomplete and Misleading Disclosures Concerning the
`Management-Prepared Financial Forecasts
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`23.
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`The Proxy discloses management-prepared financial projections for the Company
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`which are materially misleading. The Proxy indicates that in connection with the rendering of
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`Stifel’s fairness opinion, Stifel reviewed “internal financial analyses, financial projections, reports,
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`and other information prepared by its management, including, without limitation, Natus’ strategic
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`plan (the “Natus Strategic Plan”), utilized by Stifel pursuant to instructions from Natus.”
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`Accordingly, the Proxy should have, but failed to, provide certain information in the projections
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`that Natus’ management provided to the Board and Stifel.
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`24.
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`Notably, Defendants failed to disclose line-item entries forming the basis of the
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`following projected figures: (a) EBITDA; (b) Unlevered Free Cash Flow (without proposed
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`divested assets); and (c) Unlevered Free Cash Flow (plus proposed divested assets).
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`25.
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`This omitted information is necessary for Plaintiff to make an informed decision on
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`whether to vote in favor of the Proposed Transaction.
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`Materially Incomplete and Misleading Disclosures Concerning Stifel’s
`Financial Analyses
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`26. With respect to the Discounted Cash Flow Analysis, the Proxy fails to quantify the
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`following data: (a) Natus’ projected free cash flow for the calendar year 2026; (b) Natus’ terminal
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`values; and (c) the key data, inputs, and assumptions underlying the range of discount rates ranging
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`of 10% to 12% applied by Stifel.
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`27. With respect to the Selected Precedent Transactions Analysis, the Proxy fails to
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`disclose the specific financial multiples and metrics for each of the transactions analyzed by Stifel.
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`28.
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`Likewise, with respect to the Selected Companies Analysis, the Proxy fails to
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`disclose the specific financial multiples and metrics for each company studied by Stifel.
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`29. With respect to the Premiums Paid Analysis, the Proxy fails to disclose the
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`transactions reviewed in the analysis. The Proxy also omits the individual premiums observed for
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`each such transaction.
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`Materially Incomplete and Misleading Disclosures Concerning the
`Potential Conflicts of Interest by Company Insiders
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`30.
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`The Proxy also fails to disclose material information concerning Natus’
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`management’s potential conflicts of interest.
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`31.
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`Specifically, the Proxy fails to disclose if ArchiMed’s proposals or indications of
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`interest discussed the retention of Company management within the surviving company following
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`the close of the Proposed Transaction or their purchase of or participation in the combined
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`company’s stock or equity.
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`32.
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`This information is necessary to provide Company stockholders a complete and
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`accurate picture of the sales process and its fairness. Without this information, Plaintiff is not fully
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`informed as to the Defendants’ actions, including those that may have been taken in bad faith, and
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`cannot fairly assess the process. And without all material information, Plaintiff is unable to make
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`a fully informed decision in connection with the Proposed Transaction and faces irreparable harm,
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`warranting the injunctive relief sought herein.
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`33.
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`In addition, the Individual Defendants knew or recklessly disregarded that the
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`Proxy omits the material information concerning the Proposed Transaction and contains the
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`materially incomplete and misleading information discussed above.
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`34.
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`Specifically, the Individual Defendants undoubtedly reviewed the contents of the
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`Proxy before it was filed with the SEC. Indeed, as directors of the Company, they were required
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`to do so. The Individual Defendants thus knew or recklessly disregarded that the Proxy omits the
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`material information referenced above and contains the incomplete and misleading information
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`referenced above.
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`35.
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`Further, the Proxy indicates that on April 17, 2022, Stifel reviewed with the Board
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`its financial analysis of the Merger Consideration/Proposed Transaction and delivered to the Board
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`an oral opinion, which was confirmed by delivery of a written opinion of the same date, to the
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`effect that the Merger Consideration was fair, from a financial point of view, to Natus stockholders.
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`Accordingly, the Individual Defendants undoubtedly reviewed or were presented with the material
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`information concerning Stifel’s financial analyses which has been omitted from the Proxy, and
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`thus knew or should have known that such information has been omitted.
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`36.
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`Plaintiff is immediately threatened by the wrongs complained of herein and lacks
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`an adequate remedy at law. Accordingly, Plaintiff seeks injunctive and other equitable relief to
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`prevent the irreparable injury that he will continue to suffer absent judicial intervention.
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`CLAIMS FOR RELIEF
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`COUNT I
`Against All Defendants for Violations of Section 14(a) of the Exchange Act and Rule 14a-9
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`37.
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`Plaintiff incorporates each and every allegation set forth above as if fully set forth
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`herein.
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`38.
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`Defendants have filed the Proxy with the SEC with the intention of soliciting Natus
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`stockholder support for the Proposed Transaction. Each of the Individual Defendants reviewed and
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`authorized the dissemination of the Proxy, which fails to provide the material information
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`referenced above.
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`39.
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`In so doing, Defendants made materially incomplete and misleading statements
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`and/or omitted material information necessary to make the statements made not misleading. Each
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`of the Individual Defendants, by virtue of their roles as officers and/or directors of Natus, were
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`aware of the omitted information but failed to disclose such information, in violation of Section
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`14(a).
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`40.
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`Rule 14a-9, promulgated by the SEC pursuant to Section 14(a) of the Exchange
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`Act, provides that such communications with stockholders shall not contain “any statement which,
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`at the time and in the light of the circumstances under which it is made, is false or misleading with
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`respect to any material fact, or which omits to state any material fact necessary in order to make
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`the statements therein not false or misleading.” 17 C.F.R. § 240.14a-9.
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`41.
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`Specifically, and as detailed above, the Proxy violates Section 14(a) and Rule 14a-
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`9 because it omits material facts concerning: (i) management’s financial projections; (ii) the value
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`of Natus shares and the financial analyses performed by Stifel in support of its fairness opinion;
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`and (iii) potential conflicts of interest faced by Company insiders.
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`42. Moreover, in the exercise of reasonable care, the Individual Defendants knew or
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`should have known that the Proxy is materially misleading and omits material information that is
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`necessary to render it not misleading. The Individual Defendants undoubtedly reviewed and relied
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`upon the omitted information identified above in connection with their decision to approve and
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`recommend the Proposed Transaction; indeed, the Proxy states that Stifel reviewed and discussed
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`its financial analyses with the Board during various meetings including on April 17, 2022, and
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`further states that the Board considered Stifel’s financial analyses and fairness opinion in
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`connection with approving the Proposed Transaction. The Individual Defendants knew or should
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`have known that the material information identified above has been omitted from the Proxy,
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`rendering the sections of the Proxy identified above to be materially incomplete and misleading.
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`43.
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`The misrepresentations and omissions in the Proxy are material to Plaintiff, who
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`will be deprived of his right to cast an informed vote if such misrepresentations and omissions are
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`not corrected prior to the vote on the Proposed Transaction. Plaintiff has no adequate remedy at
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`law. Only through the exercise of this Court’s equitable powers can Plaintiff be fully protected
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`from the immediate and irreparable injury that Defendants’ actions threaten to inflict.
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`COUNT II
`Against the Individual Defendants for Violations of Section 20(a) of the Exchange Act
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`44.
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`Plaintiff incorporates each and every allegation set forth above as if fully set forth
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`herein.
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`45.
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`The Individual Defendants acted as controlling persons of Natus 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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`officers and/or directors of Natus and participation in and/or awareness of the Company’s
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`operations and/or intimate knowledge of the incomplete and misleading statements contained in
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`the Proxy filed with the SEC, they had the power to influence and control and did influence and
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`control, directly or indirectly, the decision making of the Company, including the content and
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`dissemination of the various statements that Plaintiff contends are materially incomplete and
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`misleading.
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`46.
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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 and other statements alleged by Plaintiff to be misleading prior to the time the
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`Proxy was filed with the SEC and had the ability to prevent the issuance of the statements or cause
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`the statements to be corrected.
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`47.
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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 the Company, and, therefore, is presumed to have had
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`the power to control or influence the particular transactions giving rise to the Exchange Act
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`violations alleged herein and exercised the same. The omitted information identified above was
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`reviewed by the Board prior to voting on the Proposed Transaction. The Proxy at issue contains
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`the unanimous recommendation of each of the Individual Defendants to approve the Proposed
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`Transaction. They were, thus, directly involved in the making of the Proxy.
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`48.
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`In addition, as the Proxy sets forth at length, and as described herein, the Individual
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`Defendants were involved in negotiating, reviewing, and approving the Merger Agreement. The
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`Proxy purports to describe the various issues and information that the Individual Defendants
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`reviewed and considered. The Individual Defendants participated in drafting and/or gave their
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`input on the content of those descriptions.
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`49.
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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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`50.
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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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`RELIEF REQUESTED
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`WHEREFORE, Plaintiff demands injunctive relief in his 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 filing an amendment to
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`the Proxy with the SEC or otherwise disseminating an amendment to the Proxy to Natus
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`stockholders unless and until Defendants agree to include the material information identified above
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`in any such amendment;
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`B.
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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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`consummating, or closing the Proposed Transaction, unless and until Defendants disclose the
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`material information identified above which has been omitted from the Proxy;
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`C.
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`In the event that the transaction is consummated prior to the entry of this Court’s
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`final judgment, rescinding it or awarding Plaintiff rescissory damages;
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`D.
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`Directing the Defendants to account to Plaintiff for all damages suffered as a result
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`of their wrongdoing;
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`E.
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`Awarding Plaintiff the costs and disbursements of this action, including reasonable
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`attorneys’ and expert fees and expenses; and
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`F.
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`Granting such other and further equitable relief as this Court may deem just and
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`proper.
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`Case 1:22-cv-05111 Document 1 Filed 06/17/22 Page 13 of 13
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`JURY DEMAND
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`Plaintiff demands a trial by jury.
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`Dated: June 17, 2022
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`ROWLEY LAW PLLC
`
`
`S/ Shane T. Rowley
`Shane T. Rowley (SR-0740)
`Danielle Rowland Lindahl
`50 Main Street, Suite 1000
`White Plains, NY 10606
`Tel: (914) 400-1920
`Fax: (914) 301-3514
`Email: srowley@rowleylawpllc.com
`Email: drl@rowleylawpllc.com
`
`Attorneys for Plaintiff
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