Why it matters: Hewlett Packard Enterprise (HPE) recently disclosed its intention to acquire Juniper Networks for $14 billion. The operation would significantly expand HPE's portfolio of network products, but Juniper shareholders are seeking a closer (and fairer) examination of the potentially unfavorable deal.
Juniper shareholder John Zaita has filed a lawsuit against the company's board of directors, alleging a violation of the Securities and Exchange Act. The lawsuit claims that Juniper's management has misrepresented several financial details about the deal, omitting significant benefits that they would receive after the acquisition is complete.
The lawsuit specifically names 10 members of Juniper's board, including CEO Rami Rahim. Zaita's attorneys argue that Rahim and others are pursuing the sale to HPE with the primary goal of extracting substantial financial gains from the acquisition. According to the lawsuit, Juniper insiders stand to be the "primary beneficiaries" of the deal.
The conflict of interest arises from the fact that board members and executives will receive "unique" benefits at the conclusion of the acquisition, while Zaita and other public shareholders would not receive comparable compensation. The lawsuit asserts that members of Juniper's management hold significant amounts of illiquid shares in the company, and these shares will be exchanged and adequately compensated after the deal is finalized.
Juniper's board has also been accused of failing to "adequately disclose" details about their post-transaction employment status. The lawsuit highlights that CEO Rami Rahim, in particular, would receive a substantial golden parachute if his employment is terminated under specific conditions. While Rahim is being considered to lead the combined networking business of Juniper and HPE, he could receive an alternative $53 million in compensation if circumstances change.
The lawsuit further contends that Juniper did not disclose the data used for financial projections crucial to evaluating the fairness of the acquisition. Zaita is seeking judicial intervention against the allegedly "unfair" HPE acquisition, which he claims would result in "irreparable injury" to his Juniper stocks.
Juniper has not provided a direct comment on Zaita's lawsuit. HPE President Antonio Neri, on the other hand, stated that the acquisition would enhance the company's position "at the nexus" of accelerating macro-AI trends. HPE aims to transform Juniper's networking hardware and services into a bridge between AI-native and cloud-native technology worlds, generating "significant value" for shareholders. However, at least one shareholder remains skeptical of this potential value.
