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Hawaiian Telcom Merger False and Misleading Registration Statement Class Action

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Hawaiian Telecom Building

On July 10, 2017 a proposed transaction was announced, under which Hawaiian Telcom Holdco, Inc. would be acquired by Cincinnati Bell, Inc. and Twin Acquisition Corp. However, the complaint for this class action alleges that the Form S-4 Registration Statement filed with the Securities and Exchange Commission (SEC) omits material information so that it is false and misleading, in violation of the Securities Exchange Act of 1934.

The class for this action is all stockholders of Hawaiian Telcom.

According to the complaint, if the Hawaiian Telcom shareholders approve the merger, they may choose one of three returns for each share of Hawaiian Telcom that they own:

  • 1.6305 Cincinnati Bell common shares,
  • 0.6522 Cincinnati Bell common shares plus $18.45 in cash, OR
  • $30.75 in cash

After the transaction is completed, Cincinnati Bell stockholders are expected to own 85% and former Hawaiian Telcom stockholders 15% of the company’s outstanding common shares.

Hawaiian Telcom, a holding company, and its subsidiaries are the largest full service provider of telecommunications services and products in Hawaii.

The complaint alleges that important information was left out of the Registration Statement for the proposed transaction, including the following:

  • The financial projections of Hawaiian Telcom and Cincinnati Bell and the valuation methods used by financial advisor UBS Securities to arrive at the decision that the merger terms were fair.
  • Aspects of UBS’s cash flow analyses of the companies and the combined company, including (a) projections of net operating loss carryforwards, (b) the inputs and assumptions for UBS’s discount rate ranges, and (c) the perpetuity growth rates implied by UBS’s analyses.
  • In UBS’s Selected Public Companies Analysis of Hawaiian Telcom, the individual multiples and financial metrics for each of the companies considered.
  • In UBS’s Selected Public Companies Analysis of Cincinnati Bell, as key inputs and actual results of the analysis, as well the individual multiples and financial metrics for each of the companies considered.
  • In UBS’s Selected Transaction Analysis, the individual multiples and financial metrics for each of the transactions considered.
  • Potential conflicts of interest of UBS, including investment banker compensation. Although the Registration Statement says that UBS has not received compensation from either company for the past two years, for anything other than work on this merger, the complaint alleges that information should be given for previous years.

Without this information, the complaint claims, shareholders are unable to fully evaluate the terms of the merger or UBS’s decision that the terms are fair. The complaint alleges that the omission of this important information from the Registration Statement renders it false and misleading and constitutes a violation of the Securities Exchange Act of 1934.

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