Netsmart expects merger vote to proceed as planned

A Delaware Chancery Court judge has ruled that Netsmart Technologies Inc. (Nasdaq: NTST) must delay its April 5 shareholder meeting until the company provides supplemental information about how its pending merger agreement was reached. The company was expected to vote on the planned merger with affiliates of Insight Venture Partners and Bessemer Venture Partners.

Included in Judge Leo Strine Jr.’s request was that the company provide financial projections underlying the discounted cash flow analysis by financial advisor William Blair & Co. Following the judge’s ruling, Netsmart issued a press release stating that it will provide the required information in short order, and the company expects the shareholder meeting and vote to proceed as planned.

The company did not say when it would comply with the ruling.

Last November, Bessemer and Insight agreed to acquire the enterprise software developer for $115 million. But certain Netsmart shareholders believed that the $16.50 per share price was too low, even though the acquisition price represented a standard premium and was higher than the company had traded since 2004. Shareholders filed a lawsuit in which was stated that Netsmart and financial advisor William Blair had focused almost exclusively on finding a private equity buyer, instead of broadening the search to include potential strategic suitors. Netsmart, in its defense, asserted that a special committee of independent directors had approved the deal, and also that the agreement included a go-shop provision.

So far, this appears to be an isolated incident, and does not necessarily presage a trend. But there is at least one similar lawsuit sitting on the Chancery Court docket, in regards to the $2.5 billion buyout of Adesa by Goldman Sachs, Kelso & Co., ValueAct Capital and Parthenon Capital. —Dan Primack