‘Pay us to shut up’

Contact: Brenon Daly

Add another deal to the hit list for plaintiffs lawyers. The ink was barely dry on Thoma Bravo’s $143m all-cash offer for PLATO Learning late last week before the ambulance-chasing law firms launched their ‘investigations’ into whether the online education company did right by its shareholders. Equally wrongheaded lawsuits (at least in our view) have been filed against Chordiant Software and Techwell in recent days.

Never mind that the bid of $5.60 for each share of PLATO represents the highest price for the stock since November 2006. And never mind that with the premium, shareholders in PLATO have seen the value of their holdings more than triple over the past year. (That’s five times the return booked by those of us who had our money in the S&P 500 over the past year.)

According to PLATO, it wasn’t looking to sell itself when the buyout shop approached it a few months ago. (Terms do include a no-shop provision, but there is a ‘fiduciary out’ that would allow the company to talk with other suitors, if any surface. There is a $5.8m breakup fee, representing a slightly higher-than-average 4% of deal value.) Of course, none of the terms really matter in the strike suits. The law firms are just looking to make noise, hoping the companies will pay them to shut up.