(CN) - Novellus Systems Inc. faces a class action for entering into an allegedly unfair $3.3 billion all-stock transaction with Lam Research Corp.
     The California-based company manufactures and supplies chemical vapor deposition equipment used in the production of semiconductors. Lam Research Corp, a supplier of wafer fabrication equipment and services to the semiconductor industry, is also named as a defendant in the complaint.
     The transaction, announced on December 14, will give Novellus shareholders 1.125 shares of Lam common stock for each share of Novellus stock. "The Proposed Acquisition significantly undervalues Novellus's intrinsic value and its value to Lam, which expects to realize substantial synergies of approximately $100 million annually as a result of the deal," the complaint states.
     Novellus is being sold for approximately $44.42 per share and the board of directors, "accepted a paltry premium of a mere 28% over the Company's closing price on December 14, 2011." The company's stock price rose as high as $41.82 per share earlier this year, and in similar transactions over the past five years, acquirers have paid an average of a 56 percent premium, according to the complaint.
     If the deal is consummated, Lam stands to own 59 per cent of the company, which will allegedly short-change Novellus shareholders because of Novellus's "clear advantage" over Lam in the micro-chip industry, says the complaint.
     The class action also accuses Novellus directors of engaging in a "conflicted and unfair sales process" designed to ensure that Lam has optimal opportunity to purchase Novellus and to also ensure that their positions of employment are maintained after the merger.
     "Moreover, defendants agreed to preclusive deal protection devices in the Merger Agreement that create a playing field that is unfairly tilted in favor of Lam and effectively chills any potential auction process for the Company, including no shop, matching rights and termination fee provisions," the complaint claims.
     The class is represented by Robbins Geller Rudman & Dowd LLP.