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CafePress Unfair Merger Agreement and Tender Offer Class Action

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CafePress, Inc. (NASDAQ: PRSS) has concluded a merger agreement under which it would become a subsidiary of Snapfish, LLC. But the complaint for this class action alleges that the terms of the merger agreement and tender offer are not in the interests of CafePress shareholders. Instead, it says, CafePress’s board of directors has been influenced by terms that will benefit only themselves. 

The class for this action is all stockholders of Cafepress common stock who are being and will be harmed by the merger under consideration.

CafePress sells personalized products, such as T-shirts, mugs, and home goods. It operates from its US website as well as websites for the UK, Canada, and Australia and sells some of its products through other online retailers.

The tender offer, which expires on November 8, 2018, offers an all-cash deal of $1.48 per share. But the complaint claims that CafePress has recently shown “sustained and solid financial performance.” It also has a new, improved website that its CEO says “will ultimately result in improved search engine optimization and the return of revenue lost from lower traffic.” The company also said its Retail Partner Channel is growing. For these reasons, the complaint claims that the money offered in the merger agreement for shares of the company should be higher. 

Why is the deal not better? The complaint claims that sales process “was flawed and inadequate, was conducted out of the self-interest of the [board of directors], and was severely compromised by the Board’s strategic plans causing the Company to hemorrhage value throughout the process.” 

Also, the complaint says, during the process, “the Board failed to implement a proper market check or attempt to play interested parties off one another to drive up the deal price.” The complaint claims the merger has significant synergistic benefits for Snapfish.

The complaint says that the Solicitation/Recommendation Statement filed with the Securities and Exchange Commission (SEC) is not clear about the nature and details of confidentiality or nondisclosure agreements the company entered into during the process. 

What is clear is that if CafePress accepts a different transaction, it might have to pay up to $12.6 million to Snapfish. This penalty would make the company more expensive for any other purchaser. The agreement also contains “no solicitation” provisions.

According to the complaint, while the board has a fiduciary duty to shareholders, its loyalties have been divided. It says that company insiders own “large, illiquid portions of Company stock” that they will be able to exchange for “significant consideration.” Also, the complaint says, the agreement contains certain employment provisions, including “golden parachute” packages. 

The complaint claims that the board has breached its fiduciary duties, and that the company and it have violated Sections 14(d), 14(e), and 20(a) of the Securities Exchange Act of 1934.

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