Juniper sued over HPE buyout after allegedly ginning up execs' wallets

Material information withheld from shareholders, it's claimed

Juniper Networks, currently in the process of being acquired by HPE, has been accused of violating US securities laws in a shareholder lawsuit.

The complaint [PDF], filed on behalf of plaintiff John Zaita in federal court in San Jose, California, alleges that Juniper's communications to shareholders about HPE's acquisition offer misrepresents or omits the financial arrangements between HPE and Juniper executives, Juniper's financial projections, and the data used to make those projections.

The lawsuit names ten Juniper board members, including CEO Rami Rahim. It contends the effort to sell Juniper to HPE represents an attempt to enrich executives and directors at the expense of shareholders.

"The breakdown of the benefits of the deal indicates that Juniper insiders are the primary beneficiaries of the Proposed Transaction, not the Company’s public stockholders such as Plaintiff," the complaint alleges.

"The Board and the Company’s executive officers are conflicted because they will have secured unique benefits for themselves from the Proposed Transaction not available to Plaintiff as a public stockholder of Juniper."

The court filing indicates that the execs and directors own large amounts of illiquid shares in Juniper that will be exchanged for merger consideration once the HPE deal goes through, and that shareholders will not benefit in the same way.

The plaintiff further contends that "the Proxy Statement fails to adequately disclose communications regarding post-transaction employment," and notes that corporate officers like Rahim have been guaranteed substantial "golden parachutes" if their employment is terminated under specific conditions. Rahim, for example, could get more than $53 million based on the specified separation scenario.

And it's claimed that the networking biz failed to reveal the data used for its financial projections – said to be necessary to assess the fairness of the deal.

Rahim has been tapped to helm the combined Juniper/HPE networking business. If the deal is done, he will report directly to HPE president and CEO Antonio Neri, who described the deal as an opportunity to address market demand for AI products.

"This transaction will strengthen HPE's position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders," he beamed in a statement when the deal was disclosed.

The $14 billion deal, at $40 per share, is expected to double the size of HPE's networking business. When it was announced on January 9, 2024, Juniper shares jumped from about $30 to around $37, where they've stayed.

Juniper did not immediately respond to a request for comment. ®

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