(CN) - 3-D printer maker Stratasys Inc. faces a shareholder class action over the company's merger with a subsidiary of Objet Ltd.
The class claims the company's board members are "aggrandizing their own financial position and interests and the interests of other company insiders at the expense of and to the detriment of class members." Shareholders also claim that the firm left out crucial information about the merger.
"Specifically, the preliminary proxy omits material information with respect to the process and events leading up to the proposed transaction," the complaint states.
For example, the company's financial advisor Piper Jaffray & Co.'s opinion on the deal was not included in the document.
"This information is particularly important considering that Objet is not publicly traded, and, accordingly, Stratasys shareholders cannot assess the relative valuation of Objet and Stratasys through their valuation of the market," the complaint states.
According to the proxy, company shareholders will own 55 percent while Objet will own 45 percent of the new company. Investors will "receive one share of the new combined company for each share of Stratasys common stock they own."
The exchange will create "a taxable event for Stratasys shareholders" because Object will be the one issuing shares to Stratasy investors. Meanwhile, investors claim the reasoning behind the merger is questionable since, "based on discussions with, and at the direction of the Stratasys board, Stratasys believed that the difference in its view and Objet's view of the relative values of the two companies was too wide to continue merger discussions," the complaint states. "Despite determining that 'each company would go its separate ways,' the companies' financial advisors continued to engage in meetings to discuss the potential relative ownership in the combined entity, meeting on Feb. 13, 2012 and again on Feb. 15, 2012."
According to the proxy, CEO S. Scott Crump, COO Thomas W. Stenoien, the Company's Chief Operating Officer, and CFO Robert F. Gallagher, "will receive $1,054,536, $982,616, and $1,144,616, respectively, upon the vesting of their unvested options in connection with the proposed transaction."
In addition, the trio will be given stock in the merged company as well as Objet ordinary shares and they've secured positions for themselves in new company.
"Stratasys's officers and directors will be able to exchange their previously unvested stock options for Objet ordinary stock," the complaint says.
The class also alleges that it was given little opportunity to weigh in on the decision to merge with Objet and "approval by the Objet shareholders is required for certain actions related to the proposed transaction, but Stratasys has entered into a voting agreement with Objet shareholders holding the requisite majority for these actions to secure the vote."
The deal is locked in with a $48 million termination fee and prohibits the firm from soliciting alternative proposals requires Stratasys to notify Objet with in 24 hours, both orally and in writing, if there is an "inquiry, expression of interest, proposal, communication or offer that constitutes, or would reasonably be expected to lead to" another company making an offer.
"The combined company, which will operate under the name Stratasys Ltd., will have dual headquarters in Eden Prairie, Minnesota and Rehovot, Israel, the locations of Stratasys's and Objet's current headquarters, respectively, and will be registered in Israel," the complaint says.
The lawsuit was filed in the Delaware Chancery Court by Brian D. Long, Seth D. Rigrodsky and Gina M. Serra of Rigrodsky & Long of Wilmington, Del.