* Shareholder seeks higher price
* Says deal structure blocks competing offers
(Adds 3M comment in paragraph seven)
WILMINGTON, Del., Sept 2 A shareholder of
Cogent Inc has sued the company's board, saying it agreed to
sell the maker of identification systems too cheaply to U.S.
manufacturer 3M Co, according to a legal complaint.
Pasadena, California-based Cogent (COGT.O), which makes
automated fingerprint identification systems that are used to
screen travelers at border crossings, agreed on Monday to sell
the company to 3M (MMM.N) for $10.50 a share, or $943 million.
The shareholder, St Nevan US Limited, argued in court
papers filed Wednesday in Delaware's Chancery Court that
Cogent's board structured the deal to reap a windfall for
themselves while blocking competing bids.
Cogent and St. Paul, Minnesota-based 3M are both Delaware
The lawsuit notes that shareholders will not be given a
vote on the deal, includes a $28.3 million break-up fee and
promises of continued employment by 3M to Cogent CEO and
founder Ming Hsieh, who owns 38.9 percent of the company's
"Individual defendants failed to conduct a full and fair
sales process and have agreed to onerous deal terms which
effectively lock up the proposed transaction in favor of 3M in
order to maximize their own financial interests at the expense
of Cogent's shareholders," the lawsuit said.
Cogent did not immediately return a call for comment. A 3M
spokeswoman said the company believed the lawsuit was without
After the deal was announced on Monday, Cogent's stock rose
above $11.00 a share and analysts noted other bidders may
Analyst Josephine Millward of Benchmark Co LLC said that
the deal values Cogent at about 6.6 times estimated 2011
earnings before special items, whereas other deals in the
homeland security and defense sectors have produced multiples
of at least 8.
The shareholder is seeking class action status and is
seeking to block the proposed merger until Cogent's board
adopts procedures to get a higher price for the company.
The case is St Nevan US Ltd v Cogent Inc, Ming Hsieh, John
C. Bolger, John P. Stenbit, Kenneth R. Thornton, 3M Company and
Ventura Acquisition Corp., Delaware Chancery Court, No. 5780.
(Reporting by Tom Hals; additional reporting by Nick Zieminski
in New York, editing by Dave Zimmerman)