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`MARC WATERMAN,
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`Plaintiff,
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`Plaintiff, by his undersigned attorneys, for this complaint against defendants, alleges upon
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 1 of 11
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`
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`COMPLAINT FOR VIOLATION OF THE
`SECURITIES EXCHANGE ACT OF 1934
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`Case No. ___________
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`JURY TRIAL DEMANDED
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`
`
`
`v.
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`
`VMWARE, INC., NICOLE ANASENES,
`ANTHONY BATES, MARIANNE BROWN,
`MICHAEL BROWN, MICHAEL DELL,
`KENNETH DENMAN, EGON DURBAN,
`KAREN DYKSTRA, RAGHU
`RAGHURAM, and PAUL SAGAN,
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`
`
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`Defendants.
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`personal knowledge with respect to himself, and upon information and belief based upon, inter
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`alia, the investigation of counsel as to all other allegations herein, as follows:
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`NATURE OF THE ACTION
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`1.
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`On May 26, 2022, VMware, Inc. (“VMware” or the “Company”) announced that it
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`will be acquired by Broadcom Inc. (“Parent”) (the “Proposed Transaction”).
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`2.
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`On May 26, 2022, VMware’s Board of Directors (the “Board” or “Individual
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`Defendants”) caused the Company to enter into a merger agreement (the “Merger Agreement”)
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`with Parent, Verona Holdco, Inc. (“Holdco”), Verona Merger Sub, Inc. (“Merger Sub 1”),
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`Barcelona Merger Sub 2, Inc. (“Merger Sub 2”), and Barcelona Merger Sub 3, LLC (“Merger Sub
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`3”). Pursuant to the terms of the Merger Agreement, VMware’s stockholders will receive either
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`$142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share they own.
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`3.
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`On July 15, 2022, defendants filed a registration statement (the “Registration
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`Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) in connection with
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 2 of 11
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`the Proposed Transaction.
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`4.
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`The Registration Statement omits material information with respect to the Proposed
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`Transaction, which renders the Registration Statement false and misleading, in violation of
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`Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
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`JURISDICTION AND VENUE
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`5.
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`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
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`of the Exchange Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the
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`Exchange Act and Rule 14a-9.
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`6.
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`This Court has jurisdiction over defendants because each defendant is either a
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`corporation that conducts business in and maintains operations within this District, or is an
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`individual with sufficient minimum contacts with this District so as to make the exercise of
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`jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.
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`7.
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`Venue is proper under 28 U.S.C. § 1391(b) because a portion of the transactions
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`and wrongs complained of herein occurred in this District.
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`PARTIES
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`8.
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`Plaintiff is, and has been continuously throughout all times relevant hereto, the
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`owner of VMware common stock.
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`9.
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`Defendant VMware is a Delaware corporation and a party to the Merger
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`Agreement. VMware’s common stock is traded on the NYSE, which is headquartered in New
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`York, NY, under the ticker symbol “VMW.”
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`10.
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`11.
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`12.
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`Defendant Nicole Anasenes is a director of the Company.
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`Defendant Anthony Bates is a director of the Company.
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`Defendant Marianne Brown is a director of the Company.
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`2
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 3 of 11
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`Defendant Michael Brown is a director of the Company.
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`Defendant Michael Dell is a director and Chairman of the board of the Company.
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`Defendant Kenneth Denman is a director of the Company.
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`Defendant Egon Durban is a director of the Company.
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`Defendant Karen Dyksra is a director of the Company.
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`Defendant Raghu Raghuram is a director and Chief Executive Officer of the
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`Defendant Paul Sagan is a director of the Company.
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`The defendants identified in paragraphs 10 through 19 are collectively referred to
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`13.
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`14.
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`15.
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`16.
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`17.
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`18.
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`Company.
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`19.
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`20.
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`herein as the “Individual Defendants.”
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`
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`SUBSTANTIVE ALLEGATIONS
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`21.
`
`(cid:57)(cid:48)(cid:90)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3031)(cid:68)(cid:3031)(cid:79)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:88)(cid:79)(cid:87)(cid:76)-cloud services for all apps, enabling digital
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`innovation with enterprise control.
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`22.
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`On May 26, 2022, VMware’s Board caused the Company to enter into the Merger
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`Agreement.
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`23.
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`The press release announcing the Proposed Transaction provides as follows:
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`Broadcom Inc. (NASDAQ: AVGO), a global technology leader that designs,
`develops and supplies semiconductor and infrastructure software solutions, and
`VMware, Inc. (NYSE: VMW), a leading innovator in enterprise software, today
`announced an agreement under which Broadcom will acquire all of the outstanding
`shares of VMware in a cash-and-stock transaction that values VMware at
`approximately $61 billion, based on the closing price of Broadcom common stock
`on May 25, 2022. In addition, Broadcom will assume $8 billion of VMware net
`debt.
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`VMware, a leading provider of multi-cloud services for all apps, pioneered
`virtualization technology, an innovation that positively transformed x86 server-
`based computing. VMware then created the software-defined data center and
`played a leading role in virtualizing networking and storage, before evolving to
`become a hybrid cloud and digital workspace leader. Today, VMware’s multi-cloud
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`3
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 4 of 11
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`portfolio, spanning application modernization, cloud management, cloud
`infrastructure, networking, security and anywhere workspaces, forms a flexible,
`consistent digital foundation on which the largest and most dynamic enterprises
`across industries build, run, manage, connect and protect their most important and
`complex workloads for the benefit of their customers.
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`Following the closing of the transaction, the Broadcom Software Group will
`rebrand and operate as VMware, incorporating Broadcom’s existing infrastructure
`and security software solutions as part of an expanded VMware portfolio.
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`By bringing together the complementary Broadcom Software portfolio with the
`leading VMware platform, the combined company will provide enterprise
`customers an expanded platform of critical infrastructure solutions to accelerate
`innovation and address the most complex information technology infrastructure
`needs. The combined solutions will enable customers, including leaders in all
`industry verticals, greater choice and flexibility to build, run, manage, connect and
`protect applications at scale across diversified, distributed environments, regardless
`of where they run: from the data center, to any cloud and to edge-computing. With
`the combined company’s shared focus on technology innovation and significant
`research and development expenditures, Broadcom will deliver compelling benefits
`for customers and partners.
`
`Hock Tan, President and Chief Executive Officer of Broadcom, said, “Building
`upon our proven track record of successful M&A, this transaction combines our
`leading semiconductor and infrastructure software businesses with an iconic
`pioneer and innovator in enterprise software as we reimagine what we can deliver
`to customers as a leading infrastructure technology company. We look forward to
`VMware’s talented team joining Broadcom, further cultivating a shared culture of
`innovation and driving even greater value for our combined stakeholders, including
`both sets of shareholders.”
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`Raghu Raghuram, Chief Executive Officer of VMware, said, “VMware has been
`reshaping the IT landscape for the past 24 years, helping our customers become
`digital businesses. We stand for innovation and unwavering support of our
`customers and their most important business operations and now we are extending
`our commitment to exceptional service and innovation by becoming the new
`software platform for Broadcom. Combining our assets and talented team with
`Broadcom’s existing enterprise software portfolio, all housed under the VMware
`brand, creates a remarkable enterprise software player. Collectively, we will deliver
`even more choice, value and innovation to customers, enabling them to thrive in
`this increasingly complex multi-cloud era.”
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`Tom Krause, President of the Broadcom Software Group, said, “VMware has long
`been recognized for its enterprise software leadership, and through this transaction
`we will provide customers worldwide with the next generation of infrastructure
`software. VMware’s platform and Broadcom’s infrastructure software solutions
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`4
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 5 of 11
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`address different but important enterprise needs, and the combined company will
`be able to serve them more effectively and securely. We have deep respect for
`VMware’s customer focus and innovation track record, and look forward to
`bringing together our two organizations.”
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`Michael Dell, Chairman of the VMware Board, said, “Together with Broadcom,
`VMware will be even better positioned to deliver valuable, innovative solutions to
`even more of the world’s largest enterprises. This is a landmark moment for
`VMware and provides our shareholders and employees with the opportunity to
`participate in meaningful upside.”
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`The transaction is expected to add approximately $8.5 billion of pro forma EBITDA
`from the acquisition within three years post-closing. Pro forma for each company’s
`fiscal year 2021, software revenue is expected to account for approximately 49%
`of total Broadcom revenue.
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`Transaction Details and Path to Completion
`Under the terms of the agreement, which has been unanimously approved by the
`boards of directors of both companies, VMware shareholders will elect to receive
`either $142.50 in cash or 0.2520 shares of Broadcom common stock for each
`VMware share. The shareholder election will be subject to proration, resulting in
`approximately 50% of VMware’s shares being exchanged for cash consideration
`and 50% being exchanged for Broadcom common stock. Based on the closing price
`of Broadcom common stock on May 25, 2022, the total $138.23 per-share
`consideration represents a 44% premium to the closing price of VMware common
`stock on May 20, 2022, the last trading day prior to media speculation regarding a
`potential transaction, and a 32% premium to VMware’s unaffected 30-day volume
`weighted average price (VWAP). Upon closing of the transaction, based on the
`outstanding shares of each company as of the date hereof, current Broadcom
`shareholders will own approximately 88% and current VMware shareholders will
`own approximately 12% of the combined company on a fully diluted basis.
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`Michael Dell and Silver Lake, which own 40.2% and 10% of VMware shares
`outstanding, respectively, have signed support agreements to vote in favor of the
`transaction, so long as the VMware Board continues to recommend the proposed
`transaction with Broadcom.
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`In connection with the transaction, Broadcom obtained commitments from a
`consortium of banks for $32 billion in new, fully committed debt financing.
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`Broadcom expects to maintain its current dividend policy of delivering 50% of its
`prior fiscal year free cash flow to shareholders. Broadcom expects to maintain an
`investment grade rating, given its strong cash flow generation and intention to
`rapidly de-lever.
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`5
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 6 of 11
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`The transaction, which is expected to be completed in Broadcom’s fiscal year 2023,
`is subject to the receipt of regulatory approvals and other customary closing
`conditions, including approval by VMware shareholders.
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`The merger agreement provides for a “go-shop” provision under which VMware
`and its Board of Directors may actively solicit, receive, evaluate and potentially
`enter negotiations with parties that offer alternative proposals during a 40-day
`period following the execution date of the definitive agreement, expiring at 11:59
`p.m. Pacific Time on July 5, 2022. There can be no assurance this process will result
`in a superior proposal. VMware does not intend to disclose developments about this
`process unless and until its Board of Directors has made a decision with respect to
`any potential superior proposal. . . .
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`Advisors
`Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Credit
`Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Wells Fargo
`Securities, LLC are serving as financial advisors to Broadcom. Wachtell, Lipton,
`Rosen & Katz and O’Melveny & Myers LLP are serving as legal counsel to
`Broadcom, and Cleary Gottlieb Steen & Hamilton LLP is serving as regulatory
`counsel.
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`Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are serving as financial
`advisors to VMware, and Gibson, Dunn & Crutcher LLP is serving as legal counsel.
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`24.
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`Defendants filed the Registration Statement with the SEC in connection with the
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`
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`Proposed Transaction, which omits material information.
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`Financial Projections
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`25.
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`The Registration Statement omits material information regarding the Company’s
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`and Parent’s financial projections, specifically: the line items underlying the financial projections.
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`26.
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`The disclosure of projected financial information is material because it provides
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`stockholders with a basis to project the future financial performance of a company, and allows
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`stockholders to better understand the financial analyses performed by the company’s financial
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`advisor in support of its fairness opinion.
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`Financial Analyses
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`27.
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`The Registration Statement omits material information regarding the financial
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`6
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 7 of 11
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`analyses conducted by Goldman Sachs & Co. LLC (“Goldman Sachs”) and J.P. Morgan Securities
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`LLC (“J.P. Morgan”). When a banker’s endorsement of the fairness of a transaction is touted to
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`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
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`range of ultimate values generated by those analyses must also be fairly disclosed.
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`28.
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`Regarding Goldman Sachs’ Illustrative Discounted Cash Flow Analysis, the
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`Registration Statement fails to disclose: (i) the terminal values utilized by the banker; (ii) the
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`individual inputs and assumptions underlying the discount rates and perpetuity growth rates
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`utilized by the banker; (iii) the total debt, cash, and cash equivalents utilized by the banker; and
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`(iv) the fully diluted shares utilized by the banker.
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`29.
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`Regarding Goldman Sachs’ Illustrative Present Value of Future Share Price
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`Analysis, the Registration Statement fails to disclose: (i) the individual inputs and assumptions
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`underlying the discount rate and multiples utilized by the banker; (ii) the total debt, cash, and cash
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`equivalents utilized by the banker; and (iii) the fully diluted shares utilized by the banker.
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`30.
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`Regarding Goldman Sachs’ Selected Precedent Transactions Analysis, the
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`Registration Statement fails to disclose: (i) the closing dates of the transactions utilized by the
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`banker; and (ii) the total values of the transactions utilized by the banker.
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`31.
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`Regarding Goldman Sachs’ Premia Paid Analysis, the Registration Statement fails
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`to disclose: (i) the transactions utilized by the banker; and (ii) the premiums paid in the transactions
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`utilized by the banker.
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`32.
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`Regarding J.P. Morgan’s Public Trading Multiples Analysis of VMWare, the
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`Registration Statement fails to disclose the individual multiples and metrics for the companies
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`utilized by the banker.
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`33.
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`Regarding J.P. Morgan’s Selected Transaction Multiples Analysis, the Registration
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`7
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 8 of 11
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`Statement fails to disclose the individual multiples and metrics for the transactions utilized by the
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`banker.
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`34.
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`Regarding J.P. Morgan’s Discounted Cash Flow Analysis of VMWare, the
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`Registration Statement fails to disclose: (i) the terminal values utilized by the banker; (ii) the
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`individual inputs and assumptions underlying the discount rates and terminal growth rates utilized
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`by the banker; (iii) the net debt utilized by the banker; and (iv) the fully diluted shares utilized by
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`the banker.
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`35.
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`Regarding J.P. Morgan’s Public Trading Multiples Analysis of Broadcom, the
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`Registration Statement fails to disclose the individual multiples and metrics for the companies
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`utilized by the banker.
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`36.
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`Regarding J.P. Morgan’s Discounted Cash Flow Analysis of Broadcom, the
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`Registration Statement fails to disclose: (i) the terminal values utilized by the banker; (ii) the
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`individual inputs and assumptions underlying the discount rates and terminal growth rates utilized
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`by the banker; (iii) the net debt utilized by the banker; and (iv) the fully diluted shares utilized by
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`the banker.
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`COUNT I
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`Claim for Violation of Section 14(a) of the Exchange Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and VMware
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`37.
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`38.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants disseminated the false and misleading Registration
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`Statement, which contained statements that, in violation of Section 14(a) of the Exchange Act and
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`Rule 14a-9, in light of the circumstances under which they were made, omitted to state material
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`facts necessary to make the statements therein not materially false or misleading. VMware is liable
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`as the issuer of these statements.
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`8
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 9 of 11
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`39.
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`The Registration Statement was prepared, reviewed, and/or disseminated by the
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`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
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`were aware of this information and their duty to disclose this information in the Registration
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`Statement.
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`40.
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`The Individual Defendants were at least negligent in filing the Registration
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`Statement with these materially false and misleading statements.
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`41.
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`The omissions and false and misleading statements in the Registration Statement
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`are material in that a reasonable stockholder will consider them important in deciding how to vote
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`on the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
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`disclosure as significantly altering the total mix of information made available in the Registration
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`Statement and in other information reasonably available to stockholders.
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`42.
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`The Registration Statement is an essential link in causing plaintiff to approve the
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`Proposed Transaction.
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`43.
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`By reason of the foregoing, defendants violated Section 14(a) of the Exchange Act
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`and Rule 14a-9 promulgated thereunder.
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`44.
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`Because of the false and misleading statements in the Registration Statement,
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`plaintiff is threatened with irreparable harm.
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`COUNT II
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`Claim for Violation of Section 20(a) of the Exchange Act
`Against the Individual Defendants
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`45.
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`46.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants acted as controlling persons of VMware 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 VMware and participation in and/or awareness of the Company’s
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`9
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 10 of 11
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`operations and/or intimate knowledge of the false statements contained in the Registration
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`Statement, they had the power to influence and control and did influence and control, directly or
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`indirectly, the decision making of the Company, including the content and dissemination of the
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`various statements that plaintiff contends are false and misleading.
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`47.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Registration Statement alleged by plaintiff to be misleading prior to and/or shortly
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`after these statements were issued and had the ability to prevent the issuance of the statements or
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`cause them to be corrected.
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`48.
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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 and influence the particular transactions giving rise to the violations as alleged
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`herein, and exercised the same. The Registration Statement contains the unanimous
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`recommendation of the Individual Defendants to approve the Proposed Transaction. They were
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`thus directly involved in the making of the Registration Statement.
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`49.
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`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
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`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) of the Exchange
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`Act and Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as
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`controlling persons, these defendants are liable pursuant to Section 20(a) of the Exchange Act. As
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`a direct and proximate result of defendants’ conduct, plaintiff is threatened with irreparable harm.
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`PRAYER FOR RELIEF
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`WHEREFORE, plaintiff prays for judgment and relief as follows:
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`10
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`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 11 of 11
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`A.
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`Preliminarily and permanently enjoining defendants and all persons acting in
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`concert with them from proceeding with, consummating, or closing the Proposed Transaction;
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`B.
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`In the event defendants consummate the Proposed Transaction, rescinding it and
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`setting it aside or awarding rescissory damages;
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`C.
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`Directing the Individual Defendants to disseminate a Registration Statement that
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`does not contain any untrue statements of material fact and that states all material facts required in
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`it or necessary to make the statements contained therein not misleading;
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`D.
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`Declaring that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act,
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`as well as Rule 14a-9 promulgated thereunder;
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`E.
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`Awarding plaintiff the costs of this action, including reasonable allowance for
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`plaintiff’s attorneys’ and experts’ fees; and
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`F.
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`Granting such other and further relief as this Court may deem just and proper.
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`
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`Plaintiff hereby requests a trial by jury on all issues so triable.
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`JURY DEMAND
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`Dated: August 2, 2022
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`By:
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`GRABAR LAW OFFICE
`
`
`Joshua H. Grabar (#5906953)
`One Liberty Place
`1650 Market Street, Suite 3600
`Philadelphia, PA 19103
`267-507-6085
`jgrabar@grabarlaw.com
`
`Counsel for Plaintiff
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`11
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