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`MARC WATERMAN,
`
`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
`
`
`
`COMPLAINT FOR VIOLATION OF THE
`SECURITIES EXCHANGE ACT OF 1934
`
`Case No. ___________
`
`JURY TRIAL DEMANDED
`
`
`
`
`v.
`
`
`VMWARE, INC., NICOLE ANASENES,
`ANTHONY BATES, MARIANNE BROWN,
`MICHAEL BROWN, MICHAEL DELL,
`KENNETH DENMAN, EGON DURBAN,
`KAREN DYKSTRA, RAGHU
`RAGHURAM, and PAUL SAGAN,
`
`
`
`
`Defendants.
`
`personal knowledge with respect to himself, and upon information and belief based upon, inter
`
`alia, the investigation of counsel as to all other allegations herein, as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`On May 26, 2022, VMware, Inc. (“VMware” or the “Company”) announced that it
`
`will be acquired by Broadcom Inc. (“Parent”) (the “Proposed Transaction”).
`
`2.
`
`On May 26, 2022, VMware’s Board of Directors (the “Board” or “Individual
`
`Defendants”) caused the Company to enter into a merger agreement (the “Merger Agreement”)
`
`with Parent, Verona Holdco, Inc. (“Holdco”), Verona Merger Sub, Inc. (“Merger Sub 1”),
`
`Barcelona Merger Sub 2, Inc. (“Merger Sub 2”), and Barcelona Merger Sub 3, LLC (“Merger Sub
`
`3”). Pursuant to the terms of the Merger Agreement, VMware’s stockholders will receive either
`
`$142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share they own.
`
`3.
`
`On July 15, 2022, defendants filed a registration statement (the “Registration
`
`Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) in connection with
`
`

`

`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 2 of 11
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`the Proposed Transaction.
`
`4.
`
`The Registration Statement omits material information with respect to the Proposed
`
`Transaction, which renders the Registration Statement false and misleading, in violation of
`
`Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
`
`JURISDICTION AND VENUE
`
`5.
`
`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
`
`of the Exchange Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the
`
`Exchange Act and Rule 14a-9.
`
`6.
`
`This Court has jurisdiction over defendants because each defendant is either a
`
`corporation that conducts business in and maintains operations within this District, or is an
`
`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.
`
`7.
`
`Venue is proper under 28 U.S.C. § 1391(b) because a portion of the transactions
`
`and wrongs complained of herein occurred in this District.
`
`PARTIES
`
`8.
`
`Plaintiff is, and has been continuously throughout all times relevant hereto, the
`
`owner of VMware common stock.
`
`9.
`
`Defendant VMware is a Delaware corporation and a party to the Merger
`
`Agreement. VMware’s common stock is traded on the NYSE, which is headquartered in New
`
`York, NY, under the ticker symbol “VMW.”
`
`10.
`
`11.
`
`12.
`
`Defendant Nicole Anasenes is a director of the Company.
`
`Defendant Anthony Bates is a director of the Company.
`
`Defendant Marianne Brown is a director of the Company.
`
`
`
`2
`
`

`

`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.
`
`Defendant Michael Dell is a director and Chairman of the board of the Company.
`
`Defendant Kenneth Denman is a director of the Company.
`
`Defendant Egon Durban is a director of the Company.
`
`Defendant Karen Dyksra is a director of the Company.
`
`Defendant Raghu Raghuram is a director and Chief Executive Officer of the
`
`Defendant Paul Sagan is a director of the Company.
`
`The defendants identified in paragraphs 10 through 19 are collectively referred to
`
`13.
`
`14.
`
`15.
`
`16.
`
`17.
`
`18.
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`Company.
`
`19.
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`20.
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`herein as the “Individual Defendants.”
`
`
`
`SUBSTANTIVE ALLEGATIONS
`
`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
`
`innovation with enterprise control.
`
`22.
`
`On May 26, 2022, VMware’s Board caused the Company to enter into the Merger
`
`Agreement.
`
`23.
`
`The press release announcing the Proposed Transaction provides as follows:
`
`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.
`
`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
`
`
`
`3
`
`

`

`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.
`
`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.
`
`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.”
`
`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.”
`
`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
`
`
`
`4
`
`

`

`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 5 of 11
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`
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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.”
`
`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.”
`
`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.
`
`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.
`
`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.
`
`In connection with the transaction, Broadcom obtained commitments from a
`consortium of banks for $32 billion in new, fully committed debt financing.
`
`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.
`
`
`
`
`5
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`

`

`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 6 of 11
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`
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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.
`
`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. . . .
`
`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.
`
`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.
`
`24.
`
`Defendants filed the Registration Statement with the SEC in connection with the
`
`
`
`Proposed Transaction, which omits material information.
`
`Financial Projections
`
`25.
`
`The Registration Statement omits material information regarding the Company’s
`
`and Parent’s financial projections, specifically: the line items underlying the financial projections.
`
`26.
`
`The disclosure of projected financial information is material because it provides
`
`stockholders with a basis to project the future financial performance of a company, and allows
`
`stockholders to better understand the financial analyses performed by the company’s financial
`
`advisor in support of its fairness opinion.
`
`Financial Analyses
`
`27.
`
`The Registration Statement omits material information regarding the financial
`
`
`
`6
`
`

`

`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
`
`LLC (“J.P. Morgan”). When a banker’s endorsement of the fairness of a transaction is touted to
`
`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
`
`range of ultimate values generated by those analyses must also be fairly disclosed.
`
`28.
`
`Regarding Goldman Sachs’ Illustrative Discounted Cash Flow Analysis, the
`
`Registration Statement fails to disclose: (i) the terminal values utilized by the banker; (ii) the
`
`individual inputs and assumptions underlying the discount rates and perpetuity growth rates
`
`utilized by the banker; (iii) the total debt, cash, and cash equivalents utilized by the banker; and
`
`(iv) the fully diluted shares utilized by the banker.
`
`29.
`
`Regarding Goldman Sachs’ Illustrative Present Value of Future Share Price
`
`Analysis, the Registration Statement fails to disclose: (i) the individual inputs and assumptions
`
`underlying the discount rate and multiples utilized by the banker; (ii) the total debt, cash, and cash
`
`equivalents utilized by the banker; and (iii) the fully diluted shares utilized by the banker.
`
`30.
`
`Regarding Goldman Sachs’ Selected Precedent Transactions Analysis, the
`
`Registration Statement fails to disclose: (i) the closing dates of the transactions utilized by the
`
`banker; and (ii) the total values of the transactions utilized by the banker.
`
`31.
`
`Regarding Goldman Sachs’ Premia Paid Analysis, the Registration Statement fails
`
`to disclose: (i) the transactions utilized by the banker; and (ii) the premiums paid in the transactions
`
`utilized by the banker.
`
`32.
`
`Regarding J.P. Morgan’s Public Trading Multiples Analysis of VMWare, the
`
`Registration Statement fails to disclose the individual multiples and metrics for the companies
`
`utilized by the banker.
`
`33.
`
`Regarding J.P. Morgan’s Selected Transaction Multiples Analysis, the Registration
`
`
`
`7
`
`

`

`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 8 of 11
`
`
`
`Statement fails to disclose the individual multiples and metrics for the transactions utilized by the
`
`banker.
`
`34.
`
`Regarding J.P. Morgan’s Discounted Cash Flow Analysis of VMWare, the
`
`Registration Statement fails to disclose: (i) the terminal values utilized by the banker; (ii) the
`
`individual inputs and assumptions underlying the discount rates and terminal growth rates utilized
`
`by the banker; (iii) the net debt utilized by the banker; and (iv) the fully diluted shares utilized by
`
`the banker.
`
`35.
`
`Regarding J.P. Morgan’s Public Trading Multiples Analysis of Broadcom, the
`
`Registration Statement fails to disclose the individual multiples and metrics for the companies
`
`utilized by the banker.
`
`36.
`
`Regarding J.P. Morgan’s Discounted Cash Flow Analysis of Broadcom, the
`
`Registration Statement fails to disclose: (i) the terminal values utilized by the banker; (ii) the
`
`individual inputs and assumptions underlying the discount rates and terminal growth rates utilized
`
`by the banker; (iii) the net debt utilized by the banker; and (iv) the fully diluted shares utilized by
`
`the banker.
`
`COUNT I
`
`Claim for Violation of Section 14(a) of the Exchange Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and VMware
`
`37.
`
`38.
`
`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
`
`The Individual Defendants disseminated the false and misleading Registration
`
`Statement, which contained statements that, in violation of Section 14(a) of the Exchange Act and
`
`Rule 14a-9, in light of the circumstances under which they were made, omitted to state material
`
`facts necessary to make the statements therein not materially false or misleading. VMware is liable
`
`as the issuer of these statements.
`
`
`
`8
`
`

`

`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 9 of 11
`
`
`
`39.
`
`The Registration Statement was prepared, reviewed, and/or disseminated by the
`
`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
`
`were aware of this information and their duty to disclose this information in the Registration
`
`Statement.
`
`40.
`
`The Individual Defendants were at least negligent in filing the Registration
`
`Statement with these materially false and misleading statements.
`
`41.
`
`The omissions and false and misleading statements in the Registration Statement
`
`are material in that a reasonable stockholder will consider them important in deciding how to vote
`
`on the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
`
`disclosure as significantly altering the total mix of information made available in the Registration
`
`Statement and in other information reasonably available to stockholders.
`
`42.
`
`The Registration Statement is an essential link in causing plaintiff to approve the
`
`Proposed Transaction.
`
`43.
`
`By reason of the foregoing, defendants violated Section 14(a) of the Exchange Act
`
`and Rule 14a-9 promulgated thereunder.
`
`44.
`
`Because of the false and misleading statements in the Registration Statement,
`
`plaintiff is threatened with irreparable harm.
`
`COUNT II
`
`Claim for Violation of Section 20(a) of the Exchange Act
`Against the Individual Defendants
`
`45.
`
`46.
`
`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
`
`The Individual Defendants acted as controlling persons of VMware within the
`
`meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their positions as
`
`officers and/or directors of VMware and participation in and/or awareness of the Company’s
`
`
`
`9
`
`

`

`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
`
`Statement, they had the power to influence and control and did influence and control, directly or
`
`indirectly, the decision making of the Company, including the content and dissemination of the
`
`various statements that plaintiff contends are false and misleading.
`
`47.
`
`Each of the Individual Defendants was provided with or had unlimited access to
`
`copies of the Registration Statement alleged by plaintiff to be misleading prior to and/or shortly
`
`after these statements were issued and had the ability to prevent the issuance of the statements or
`
`cause them to be corrected.
`
`48.
`
`In particular, each of the Individual Defendants had direct and supervisory
`
`involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had
`
`the power to control and influence the particular transactions giving rise to the violations as alleged
`
`herein, and exercised the same. The Registration Statement contains the unanimous
`
`recommendation of the Individual Defendants to approve the Proposed Transaction. They were
`
`thus directly involved in the making of the Registration Statement.
`
`49.
`
`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
`
`Exchange Act.
`
`50.
`
`As set forth above, the Individual Defendants had the ability to exercise control
`
`over and did control a person or persons who have each violated Section 14(a) of the Exchange
`
`Act and Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as
`
`controlling persons, these defendants are liable pursuant to Section 20(a) of the Exchange Act. As
`
`a direct and proximate result of defendants’ conduct, plaintiff is threatened with irreparable harm.
`
`PRAYER FOR RELIEF
`
`WHEREFORE, plaintiff prays for judgment and relief as follows:
`
`10
`
`
`
`
`
`

`

`Case 1:22-cv-06533 Document 1 Filed 08/02/22 Page 11 of 11
`
`
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`A.
`
`Preliminarily and permanently enjoining defendants and all persons acting in
`
`concert with them from proceeding with, consummating, or closing the Proposed Transaction;
`
`B.
`
`In the event defendants consummate the Proposed Transaction, rescinding it and
`
`setting it aside or awarding rescissory damages;
`
`C.
`
`Directing the Individual Defendants to disseminate a Registration Statement that
`
`does not contain any untrue statements of material fact and that states all material facts required in
`
`it or necessary to make the statements contained therein not misleading;
`
`D.
`
`Declaring that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act,
`
`as well as Rule 14a-9 promulgated thereunder;
`
`E.
`
`Awarding plaintiff the costs of this action, including reasonable allowance for
`
`plaintiff’s attorneys’ and experts’ fees; and
`
`F.
`
`Granting such other and further relief as this Court may deem just and proper.
`
`
`
`Plaintiff hereby requests a trial by jury on all issues so triable.
`
`JURY DEMAND
`
`Dated: August 2, 2022
`
`
`
`
`
`
`
`
`By:
`
`
`
`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
`
`11
`
`

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