Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 1 of 10
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
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`Case No. ______________
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`JURY TRIAL DEMANDED
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`DENNIS PALKON,
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`Plaintiff,
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`v.
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`ALASKA COMMUNICATIONS SYSTEMS
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`GROUP, INC., DAVID W. KARP, PETER D.
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`AQUINO, WAYNE BARR, JR., BILL
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`BISHOP, BENJAMIN C. DUSTER, IV, and
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`SHELLY LOMBARD,
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`Defendants.
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`COMPLAINT FOR VIOLATION OF SECTIONS 14(a) and 20(a)
`OF THE SECURITIES EXCHANGE ACT OF 1934
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`Plaintiff, Dennis Palkon (“Plaintiff”), by and through his undersigned attorneys, alleges
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`upon personal knowledge with respect to himself, and upon information and belief based upon,
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`among other things, 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 December 31, 2020, the Board of Directors (the “Board” or “Individual
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`Defendants”) of Alaska Communications Systems Group, Inc. (“Alaska” or the “Company”)
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`caused Alaska to enter into an agreement and plan of merger (the “Merger Agreement”) under
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`which Alaska will be acquired by Project 8 Buyer, LLC (“Parent”) and Project 8 MergerSub, Inc.
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`(“Merger Sub”), which are affiliates of ATN International, Inc.(the “Proposed Transaction”).
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`2.
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`Under the terms of the Merger Agreement, Alaska shareholders will receive $3.40
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`per share in cash.
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`3.
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`On January 25, 2021, Defendants (defined below) filed a proxy (the “Proxy”) with
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`the U.S. Securities and Exchange Commission (“SEC”). As alleged herein, the Proxy omits
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 2 of 10
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`material information regarding the Proposed Transaction in violation of Sections 14(a) and 20(a)
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`of the Securities Exchange Act of 1934 (the “Exchange Act”).
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`JURISDICTION AND VENUE
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`4.
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`This Court has jurisdiction over all claims asserted herein pursuant to Section 27 of
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`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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`5.
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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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`6.
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`Venue is proper under 28 U.S.C. § 1391 because a portion of the transactions and
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`wrongs complained of herein occurred in this District.
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`PARTIES
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`7.
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`Plaintiff is and has been continuously throughout all relevant times the owner of
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`Alaska common stock.
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`8.
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`Defendant Alaska is a Delaware corporation. Alaska’s common stock trades on the
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`NASDAQ under the ticker symbol “ALSK.”
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`9.
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`10.
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`11.
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`12.
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`Board.
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`13.
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`14.
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`Defendant David W. Karp is Chairman of the Board of the Company.
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`Defendant Peter D. Aquino is a member of the Board.
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`Defendant Wayne Barr, Jr. is a member of the Board.
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`Defendant Bill Bishop is President, Chief Executive Officer, and a member of the
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`Defendant Benjamin C. Duster, IV is a member of the Board.
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`Defendant Shelly Lombard is a member of the Board.
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 3 of 10
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`Defendants identified in paragraphs 9-14 are referred to herein as the “Individual
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`15.
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`Defendants.”
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`16.
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`Defendants identified in paragraphs 8-14 are referred to herein as the “Defendants.”
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`SUBSTANTIVE ALLEGATIONS
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`17.
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`The Company is the leading provider of advanced broadband and managed IT
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`services for businesses and consumers in Alaska. The Company operates a highly reliable,
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`advanced statewide data network with the latest technology and the most diverse undersea fiber
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`optic system connecting Alaska to the contiguous United States.
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`18.
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`On December 31, 2020, the Company entered into the Merger Agreement. Under
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`the terms of the Merger Agreement, the Company’s stockholders will receive $3.40 per share in
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`cash.
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`19.
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`The press release announcing the Proposed Transaction stated:
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`Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) (“Alaska
`Communications” or the “Company”) announced today that on December 31, 2020
`it entered into a definitive agreement pursuant to which the Company will be
`acquired by a newly formed entity owned by ATN International, Inc. (NASDAQ:
`ATNI) (“ATN”) and Freedom 3 Capital, LLC (“FC3”) in an all cash transaction
`valued at approximately $332 million, including net debt. The merger will result in
`Alaska Communications becoming a consolidated, majority owned subsidiary of
`ATN and is expected to close in the second half of 2021. Alaska Communications’
`prior agreement to be acquired by an affiliate of Macquarie Capital (“Macquarie”)
`and GCM Grosvenor (“GCM”), through its Labor Impact Fund, L.P., has been
`terminated.
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`Under the terms of the agreement, an affiliate of ATN will acquire all the
`outstanding shares of Alaska Communications common stock for $3.40 per share
`in cash. This represents a premium of approximately 78% over the closing per share
`price of $1.91 on November 2, 2020, the last trading day prior to the date when
`Alaska Communications’ original merger agreement with Macquarie and GCM
`was executed, a 70% premium to the 30-day volume weighted average price up to
`and including November 2, 2020 and a 4% premium to Macquarie and GCM’s prior
`binding agreement to acquire the Company.
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`The merger agreement follows the determination by the Alaska Communications
`Board of Directors, after consultation with its legal and financial advisors, that the
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 4 of 10
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`in Alaska
`ATN proposal constituted a “Superior Proposal” as defined
`Communications’ previously announced merger agreement with Macquarie and
`GCM. Consistent with that determination and following the expiration of the
`negotiation period with Macquarie and GCM required under such agreement,
`Alaska Communications terminated that agreement. In connection with the
`termination, Alaska Communications paid Macquarie and GCM a $6.8 million
`break-up fee.
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`David W. Karp, Chairman of the Alaska Communications Board of Directors, said,
`“Today’s announcement is the product of a comprehensive process that
`demonstrates what a strong business the team at Alaska Communications has built.
`The agreement with ATN is a great result for our stockholders, who will receive
`significant near-term value.”
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`Bill Bishop, President and Chief Executive Officer of Alaska Communications,
`stated, “This transaction represents an exciting opportunity to augment our market
`position, as well as, expand our capabilities to better serve our customers. ATN has
`extensive telecommunications expertise, a strong track record of successfully
`investing in and operating capital-intensive businesses and has a strong financial
`position highlighted by its net cash position. These are critical attributes that will
`support our strategy to deliver superior customer service utilizing our fiber-based
`network solutions. We firmly believe this transaction will allow us to enhance our
`expanded fiber network services and drive long-term value for our employees and
`customers in Alaska.”
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`Michael Prior, Chairman and Chief Executive Officer of ATN, stated, “This
`investment and merger allows us to enter a new market with many similar
`characteristics to our existing operations in the U.S. and elsewhere. Further, it
`aligns with our strategy to leverage the broad capabilities of our operating platform
`to enhance and augment leading providers of facilities-based communications
`services in distinctive markets. ATN has a long history of enabling its subsidiaries
`to gain and maintain strong market positions by investing in high quality
`infrastructure, the latest technologies and creative solutions to give customers a
`superior experience. We recognize the same determination and customer-centric
`approach in the Alaska Communications team. Our industry is rapidly changing,
`and communications requirements have never been more essential and critical than
`they are today. We look forward to combining our resources and experience with
`Alaska Communications’ market knowledge and reputation for superior service to
`provide industry-leading communications products and services to customers in
`Alaska and beyond.”
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`The merger is subject to the approval of Alaska Communications’ stockholders,
`regulatory approvals and other customary closing conditions. The merger has fully
`committed debt and equity financing and is not subject to any condition with regard
`to financing. Alaska Communications’ Board of Directors has unanimously
`approved
`the agreement and recommends
`that Alaska Communications’
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 5 of 10
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`stockholders approve the proposed merger and merger agreement. Alaska
`Communications expects to hold a special meeting of stockholders to consider and
`vote on the proposed merger and merger agreement as soon as practicable after the
`mailing of the Proxy to its stockholders.
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`TAR Holdings, LLC, which owns approximately 8.8% of the outstanding shares of
`Alaska Communications common stock, has entered into a voting agreement with
`ATN agreeing, among other things, to vote in favor of the merger. The voting
`agreement will automatically terminate upon the earliest of (a) the vote of
`stockholders on the merger, (b) any termination of the Merger Agreement, (c) any
`change in recommendation by the Board of Alaska Communications and (d) 14
`months after the signing of the Merger Agreement. Under the voting agreement,
`TAR Holdings, LLC may sell shares of the Company’s stock in the open market
`through a broker dealer.
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`Advisors
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`Bank Street Group, LLC is serving as financial advisor and Morrison & Foerster
`LLP is serving as legal advisor to ATN in connection with the transaction.
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`B. Riley Securities, Inc. is serving as financial advisor and Sidley Austin LLP is
`serving as legal advisor to Alaska Communications in connection with the
`transaction.
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`20.
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`On January 25, 2021, Defendants filed the Proxy with the SEC. As alleged below,
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`the Proxy fails to disclose material information.
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`Alaska’s Financial Projections
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`21.
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`First, the Proxy fails to disclose material information with respect to Alaska’s
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`financial projections.
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`22.
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`The disclosure of projected financial information is material. It provides
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`stockholders with a basis to project the future financial performance of a company. Moreover, it
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`allows stockholders to better understand the financial analyses performed by the company’s
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`financial advisor in support of its fairness opinion.
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`23.
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`The Proxy fails to disclose:
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`(i) the line items used to calculate adjusted EBITDA and adjusted free cash flow;
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 6 of 10
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`and
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`(ii) a reconciliation of the non-GAAP to GAAP metrics.
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`B. Riley’s Financial Analyses
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`24.
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`Second, the Proxy fails to disclose material information with respect to the financial
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`analyses performed by B. Riley Securities, Inc. (“B. Riley”), Alaska’s financial advisor.
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`25. 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 and the key inputs and range of
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`ultimate values generated by those analyses must be fairly disclosed.
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`26.
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`The Proxy fails to disclose the multiples and metrics for the companies observed
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`by B. Riley in its Selected Public Company Analysis.
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`27.
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`The Proxy fails to disclose the multiples and metrics for the transactions observed
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`by B. Riley in its Selected Precedent Transactions Analysis.
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`28.
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`The Proxy fails to disclose the following regarding B. Riley’s Discounted Cash
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`Flow Analysis:
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`(i) the unlevered free cash flows and the line items used to calculate unlevered free
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`cash flows;
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`(ii) the terminal values;
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`(iii) the basis for applying multiples ranging from 4.5x to 5.5x; and
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`(iv) the inputs and assumptions underlying the discount rates of 11.5% to 12.5%
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`29.
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`The Proxy fails to disclose the following regarding B. Riley’s Premiums Paid
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`Analysis:
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`(i) the transactions observed in the analysis; and
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`(ii) the premiums paid in the transactions.
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 7 of 10
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`B. Riley’s Potential Conflicts of Interest
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`30.
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`Third, the Proxy fails to disclose material information with respect to B. Riley’s
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`potential conflicts of interest.
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`31.
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`Full disclosure of investment banker compensation and all potential conflicts is
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`required because of the central role played by investment banks in the evaluation, exploration,
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`selection, and implementation of strategic alternatives.
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`32.
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`The Proxy fails to provide whether B. Riley has performed past services for the
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`parties to the Merger Agreement or their affiliates. If so, the Proxy must disclose the timing and
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`nature of the services and the amount of compensation received by B. Riley for performing the
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`services.
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`33.
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`The omission of this material information renders the Proxy false and misleading.
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`This information, if disclosed, would significantly alter the total mix of information available to
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`Alaska’s stockholders.
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`COUNT I
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`CLAIM AGAINST THE INDIVIDUAL DEFENDANTS AND ALASKA FOR
`VIOLATION OF SECTION 14(A) OF THE EXCHANGE ACT AND RULE 14A-9
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`34.
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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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`35.
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`The Individual Defendants disseminated the false and misleading Proxy, which
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`contained statements that, in violation of Section 14(a) of the Exchange Act and Rule 14a-9, in
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`light of the circumstances under which they were made, failed to state material facts necessary to
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`make the statements therein not materially false or misleading.
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`36.
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`Alaska is liable as the issuer of these statements.
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 8 of 10
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`The Proxy was prepared, reviewed, and/or disseminated by the Individual
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`37.
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`Defendants.
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`38.
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`By virtue of their positions within the Company, the Individual Defendants were
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`aware of this information and their duty to disclose this information in the Proxy.
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`39.
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`The Individual Defendants were at least negligent in filing the Proxy with these
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`materially false and misleading statements.
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`40.
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`The omissions and false and misleading statements in the Proxy are material in that
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`a reasonable stockholder will consider them important in deciding how to vote on the Proposed
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`Transaction. In addition, a reasonable investor will view a full and accurate disclosure as
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`significantly altering the total mix of information made available in the Proxy and in other
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`information reasonably available to stockholders.
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`41.
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`The Proxy is an essential link in causing Plaintiff to approve the Proposed
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`Transaction.
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`42.
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`As a result, Defendants violated Section 14(a) of the Exchange Act and Rule 14a-
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`9 promulgated thereunder.
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`43.
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`Plaintiff is threatened with irreparable harm and has no adequate remedy at law.
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`COUNT II
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`CLAIM AGAINST THE INDIVIDUAL DEFENDANTS
`FOR VIOLATION 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 Alaska within the
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`meaning of Section 20(a) of the Exchange Act.
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 9 of 10
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`By virtue of their positions as officers and/or directors of Alaska and participation
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`46.
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`in and/or awareness of the Company’s operations and/or intimate knowledge of the false
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`statements contained in the Proxy, they had the power to influence and control and did influence
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`and 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 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 Proxy alleged by Plaintiff to be misleading prior to and/or shortly after these
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`statements were issued and had the ability to prevent the issuance of the statements or cause them
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`to be corrected.
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`48.
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`Each of the Individual Defendants had direct and supervisory involvement in the
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`day-to-day operations of the Company, and, thus, is presumed to have had the power to control
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`and influence the particular transactions giving rise to the violations as alleged herein, and
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`exercised the same.
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`49.
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`The Proxy contains the unanimous recommendation of the Individual Defendants
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`to approve the Proposed Transaction. They were thus directly involved in the making of the Proxy.
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`50.
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`51.
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`As a result, the Individual Defendants violated Section 20(a) of the Exchange Act.
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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.
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`52.
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`By virtue of their positions as controlling persons, Defendants are liable under
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`Section 20(a) of the Exchange Act.
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`53.
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`Plaintiff is threatened with irreparable harm and has no adequate remedy at law.
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`Case 5:21-cv-00481-EGS Document 1 Filed 02/02/21 Page 10 of 10
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff prays for judgment and relief against Defendants as follows:
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`A.
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`Enjoining Defendants and all persons acting in concert with them from proceeding
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`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 Defendants to file a Proxy that does not contain any untrue statements of
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`material fact and that states all material facts required in it or necessary to make the statements
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`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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`and Rule 14a-9;
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`E.
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`Awarding Plaintiff the costs of this action, including reasonable allowance for
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`attorneys’ and experts’ fees; and
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`F.
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`Granting such other relief as the Court deems just and proper.
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`Plaintiff requests a trial by jury on all issues so triable.
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`JURY DEMAND
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`Dated: February 2, 2021
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`By:
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`RM LAW, P.C.
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`/s/ Richard A. Maniskas
`Richard A. Maniskas
`1055 Westlakes Drive, Suite 300
`Berwyn, PA 19312
`Phone: (484) 324-6800
`Fax: (484) 631-1305
`rm@maniskas.com
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`Counsel for Plaintiff
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