SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4 TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
CHEYENNE SOFTWARE, INC.
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(Name of Subject Company)
TSE-TSEHESE-STAESTSE, INC.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
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(Bidder)
COMMON STOCK, PAR VALUE $.01 PER SHARE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
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(Title of Class of Securities)
166888107
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(CUSIP Number of Class of Securities)
SANJAY KUMAR
TSE-TSEHESE-STAESTSE, INC.
C/O COMPUTER ASSOCIATES INTERNATIONAL, INC.
ONE COMPUTER ASSOCIATES PLAZA
ISLANDIA, NEW YORK 11788-7000
TELEPHONE: (516) 342-5224
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
SCOTT F. SMITH, ESQ.
HOWARD, DARBY & LEVIN
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 841-1000
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OCTOBER 11, 1996
(Date Tender Offer First Published,
Sent or Given to Security Holders)
Page 1 of 4 Pages
Exhibit Index begins on Page 4
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Computer Associates International, Inc. and its wholly owned
subsidiary, Tse-tsehese-staestse, Inc., hereby amend and supplement
their Tender Offer Statement on Schedule 14D-1, originally filed on
October 11, 1996 and amended by Amendment No. 1 filed on October 22,
1996, Amendment No. 2 filed on October 25, 1996 and Amendment No. 3
filed on November 4, 1996 (the "Statement"), with respect to an offer to
purchase all outstanding shares of Common Stock, par value $.01 per
share, including associated Preferred Share Purchase Rights, of Cheyenne
Software, Inc. as set forth in this Amendment No. 4. Capitalized terms
not defined in this Amendment No. 4 have the meanings assigned to them
in the Statement.
Item 10. Additional Information.
The response to Item 10(e) is hereby supplemented as follows:
On November 7, 1996, Computer Associates and the Company
issued a joint press release announcing that the Court of Chancery of
the State of Delaware denied a motion to preliminarily enjoin
consummation of the Offer. The motion related to an amendment to a
purported class action complaint originally filed against the Company
and members of the Company's board of directors in April 1996. Copies
of the joint press release and the Court of Chancery's memorandum
opinion denying the motion are attached hereto as Exhibits (a)(13) and
(a)(14), respectively, and are incorporated herein by reference. The
amended complaint has been previously filed as Exhibit (a)(10) to the
Statement and is incorporated herein by reference. The foregoing
description is qualified in its entirety by reference to such exhibits.
Item 11. Material to be Filed as Exhibits.
(a)(13) Text of joint press release issued by Computer Associates and
the Company dated November 7, 1996.
(a)(14) Memorandum opinion issued November 7, 1996 by the Court of
Chancery of the State of Delaware.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: November 8, 1996
TSE-TSEHESE-STAESTSE, INC.
By/s/ Peter Schwartz
--------------------------------------
Name: Peter Schwartz
Title: Vice President and Treasurer
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By/s/ Peter Schwartz
---------------------------------------
Name: Peter Schwartz
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Exhibit Name
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(a)(13) Text of joint press release issued by Computer Associates
and the Company dated November 7, 1996.
(a)(14) Memorandum opinion issued November 7, 1996 by the Court of
Chancery of the State of Delaware.
Exhibit 99 (a)(13)
Contact: Doug Robinson Bob Gordon
CA Investor Relations CA Public Relations
(516) 342-2745 (516) 342-2391
[email protected] [email protected]
Elliot Levine - Cheyenne EVP/CFO
(516) 465-4000
COMPUTER ASSOCIATES ANNOUNCES DELAWARE COURT HAS DENIED MOTION TO ENJOIN
CONSUMMATION OF CHEYENNE TENDER OFFER
ISLANDIA, NY and ROSLYN HEIGHTS, NY, November 7, 1996 - Computer
Associates International, Inc. (NYSE: CA) and Cheyenne Software, Inc.
(AMEX: CYE) announced today that the Delaware Chancery Court has denied
a motion to preliminarily enjoin consummation of the tender offer by CA
for all the outstanding shares of Cheyenne common stock, at a price of
$30.50 per share. The motion was based on the alleged failure by
Cheyenne and the members of its Board of Directors to disclose to
shareholders certain financial information considered in connection with
the tender offer. The offer is scheduled to expire at 12:00 midnight,
New York City time, on Friday, November 8, 1996.
Computer Associates International, Inc. (NYSE: CA), with headquarters in
Islandia, NY, is the world leader in mission-critical software. The
company develops, licenses, and supports more than 500 integrated
products that include enterprise computing and information management,
application development, manufacturing and financial applications. CA
has 9000 people in 130 offices in 40 countries and had revenue of more
than $3.5 billion in fiscal year 1996. CA can be reached by visiting
http://www.cai.com on the World Wide Web, emailing [email protected], or
calling 1-516-342-5224.
Cheyenne Software, Inc. is an international developer of essential
software solutions for NetWare, Windows NT, UNIX, Macintosh, OS/2,
Windows 3.1 and Windows 95 operating systems. Its enterprise-wide
offerings include an array of storage management, security, and
communications products, including Cheyenne(r) HSM, JETserve(tm),
InocuLAN(tm), FAXserve(tm), and its flagship product line, the
ARCserve(r) family of network backup software. Cheyenne can be
contacted at (800) 243-9462 (U.S. or Canada) or (516) 465-4000, or by
visiting its WWW home page at: http://www.cheyenne.com.
Exhibit 99 (a)(14)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE CHEYENNE SOFTWARE, INC. ) CONSOLIDATED
SHAREHOLDERS LITIGATION ) C.A. NO. 14941
MEMORANDUM OPINION
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Date Submitted: November 6, 1996
Date Decided: November 7, 1996
Pamela S. Tikellis, Esquire, and James C. Strum, Esquire, of CHIMICLES,
JACOBSEN & TIKELLIS, Wilmington, Delaware; and Joseph A. Rosenthal,
Esquire, of ROSENTHAL MONHAIT GROSS & GODDESS, P.A., Wilmington,
Delaware; OF COUNSEL: Stanley D. Bernstein, Esquire, of BERNSTEIN
LIEBHARD & LIFSHITZ, New York, New York; Jon Plasse, Esquire, of
GOODKIND LABATON RUDOFF & SUCHAROW, LLP, New York, New York; LAW OFFICES
OF BERNARD M. GROSS, P.C., Philadelphia, Pennsylvania; LAW OFFICE OF
DENNIS JOHNSON, S. Burlington, Vermont; KAUFMAN MALCHMAN KIRBY & SQUIRE,
LLP, New York, New York; MALINA & WOLSON, New York, New York; SAVETT
FRUTKIN PODELL & RYAN, P.C., Philadelphia, Pennsylvania; WECHSLER
HARWOOD HALEBIAN & FEFFER, LLP, New York, New York; WOLF, HALDENSTEIN,
ADLER, FREEMAN & HERZ, LLP, New York, New York; ZWERLING SCHACHTER
ZERLING & KOPELL, New York, New York; Attorneys for Plaintiffs.
Wayne N. Elliott, Esquire, James L. Holzman, Esquire, and Elizabeth M.
McGeever, Esquire, of PRICKETT, JONES, ELLIOTT, KRISTOL & SCHNEE,
Wilmington, Delaware, Attorneys for Defendant Computer Associates
International, Inc.
Kenneth J. Nachbar, Esquire, and Donna L. Culver, Esquire, of MORRIS,
NICHOLS, ARSHT & TUNNELL, Wilmington, Delaware; OF COUNSEL: WACHTELL
LIPTON ROSEN & KATZ, New York, New York, Attorneys for Defendants
Reijane Huai, Rino Bergonzi, Richard F. Kramer, Bernard Rubien, Ginette
Wachtel, and Cheyenne Software, Inc.
CHANDLER, Vice Chancellor
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Asserting breach of the fiduciary duties of due care and full
disclosure by a target board of directors, shareholders seek to enjoin
the closing of a tender offer that expires at midnight November 8. The
all-cash, all-shares offer for $32.50 per share is at a substantial
premium over the pre-offer market price. Finding no reasonable
probability of success on the merits and concluding that the balance of
hardships tips in defendants' favor, I deny the shareholders'
application for injunctive relief.
I. BACKGROUND
In late 1995, Computer Associates International, Inc. ("Computer
Associates") expressed an interest in acquiring Cheyenne Software, Inc.
("Cheyenne"). About the same time, Cheyenne's management decided that
Cheyenne's long-term interests would be best served through an alliance
with a larger company. To explore whether companies other than Computer
Associates might also have an acquisition interest, Cheyenne, through an
investment banking firm specializing in the technology sector, contacted
seven other potential acquirors. None of these companies, however,
expressed an interest in acquiring Cheyenne.
In March 1996, Cheyenne's stock price dropped in one day, from $23
per share to $15 per share, in response to Cheyenne's announcement that
its quarterly income would be less than expected. Shortly thereafter,
McAfee Associates, Inc. ("McAfee") made an unsolicited stock-for-stock
merger proposal. While the nominal value of the offer, based on the
prevailing price of McAfee's stock, was $27.50, Cheyenne's Board of
Directors believed that the merger would not be a good strategic fit and
that McAfee's stock price would decline if the merger succeeded. Thus,
Cheyenne's Board valued the McAfee offer at $24 per share and voted
unanimously to reject the proposal. On April 16, plaintiffs filed a
class action lawsuit against Cheyenne and its Board of Directors,
alleging that they improperly rejected the McAfee proposal.
When representatives of Cheyenne and Computer Associates met in
June 1996 to discuss Cheyenne's possible sale, Computer Associates
indicated that it would not pay more than the amount McAfee had offered.
In September, however, Computer Associates offered $30 per share in
cash. Cheyenne's Board discussed the offer with its legal and financial
advisors, Lazard Freres & Co. LLC ("Lazard Freres") and Wachtell Lipton
Rosen & Katz ("Wachtell Lipton"), and reached a preliminary conclusion
that $30 per share or more in cash would be at fair offer to Cheyenne's
shareholders. The Board did not make an attempt to contact other
potential bidders because Cheyenne had previously contacted seven other
potential acquirors in late 1995 and no other offer had developed since
that time. The Board also believed that contacting further bidders
might jeopardize the opportunity to sell Cheyenne to Computer
Associates.
During a meeting on October 6, 1996, Computer Associates raised
its cash offer to $30.30 per share. After Cheyenne's Chairman,
President and CEO, Reijane Huai, suggested $32.50 per share, Computer
Associates lowered its bid to $28.50 per share. That afternoon,
Cheyenne's Board consulted with Lazard Freres and Wachtell Lipton, and
decided to reject the offer as inadequate. That evening, Computer
Associates again offered $30.30 per share and indicated that it would
publicly announce its offer the next day.
<PAGE> 3
Cheyenne's stock was trading at $22. Fearing that a hostile
tender offer by Computer Associates at $30.30 per share would succeed,
and knowing that McAfee's $27.50 stock-for-stock proposal had been the
only other offer available, Huai nonetheless decided to meet again with
Computer Associates in a final attempt to improve the offer. Shortly
after midnight, October 7, Computer Associates raised its offer to
$30.50. This offer was unanimously approved by the Board after a
ninety-minute meeting in the early hours of October 7, during which the
Board was advised by Lazard Freres that the proposal was fair to
Cheyenne's shareholders. Cheyenne's Board unanimously approved the
final merger agreement that same day and the transaction was publicly
announced. The agreement contained a "fiduciary out" permitting
Cheyenne to receive higher unsolicited offers from third parties. It
also contained a $37.5 million termination fee payable if Cheyenne's
Board withdrew its approval of the merger or if Cheyenne were acquired
by another party. On October 11, Computer Associates, through its
subsidiary, commenced the offer to purchase and Cheyenne filed its 14D-9
recommending that Cheyenne shareholders tender their shares. On October
18, plaintiffs filed an amended class action complaint alleging that
Cheyenne's Board failed to exercise due care and failed to disclose
material information to Cheyenne shareholders in connection with
Computer Associates' tender offer. On November 6, 1 heard oral argument
on plaintiffs' motion for a preliminary injunction to enjoin the tender
offer, which closes at midnight November 8.
II. LEGAL STANDARD FOR A PRELIMINARY INJUNCTION
The standard for a preliminary injunction consists of three
separate elements. Plaintiffs must show (1) that the action has a
reasonable probability of ultimate success on the merits, (2) that
absent an injunction, plaintiffs will suffer immediate and irreparable
harm, and (3) that the harm that would be suffered by plaintiffs if the
injunction were to be granted outweighs the harm that would be suffered
by defendants if the injunction were to be denied.1
III. ANALYSIS
A. The Cheyenne Directors' Duty of Due Care
Plaintiffs allege that Cheyenne's directors breached their
fiduciary duty of due care by acting hastily and by failing to question
the bases for Lazard Freres' use of a 21% discount rate in its cash flow
analysis. The duty of care requires directors to act on an informed
basis.2 Whether directors have acted on an informed basis depends upon
"whether the directors have informed themselves 'prior to making a
business decision, of all material information reasonably available to
them'"3 Section 141(e) of Delaware's corporation law provides that
directors are protected from a breach of the duty of due care when the
directors reasonably believe the information upon which they rely has
been presented by an expert "selected with reasonable care" and is
within that person's "professional or expert competence." Furthermore,
the decision of a board to accept or reject a tender offer is protected
by the business judgment rule. Thus, to overcome the presumption that
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1 Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., Del. Supr., 506
A.2d 173, 179 (1986).
2 Cede & Co. v. Technicolor, Inc., Del. Supr., 634 A.2d 345, 367 (1993).
3 Smith v. Van Gorkom, Del. Supr., 488 A.2d 858 (1985), citing Kaplan
v. Centex Corp., Del. Ch., 284 A.2d 119, 124 (1971).
<PAGE> 4
the directors acted on an informed basis, plaintiffs must show that the
Board acted with gross negligence.4
Plaintiffs have not established that their duty of care claim has
a reasonable chance of ultimate success on the merits. Nothing in this
record indicates that Lazard Freres was not selected with reasonable
care or that the information they presented to the Board was not within
their expert competence. Nor is there evidence that the Board failed to
adequately examine the Lazard Freres' book that was reviewed by Mr.
Rosenfeld, a managing director of Lazard Freres, with the Board on
October 7. In that meeting, Mr. Rosenfeld explained the reasons behind
Lazard Freres' use of a 21% discount rate as well as the impact that
different discount rates would have upon the share price. Minutes of
the Board meeting reveal that Mr. Rosenfeld discussed the strengths and
weaknesses of four different share price ranges resulting from four
different combinations of discount rates and growth rate projections
provided by both Cheyenne management and computer industry analysts.
Finally, there is no indication that the Board acted hastily.
Cheyenne's Board had considered a sale or other business combination
since late 1995. It had approached seven other potential bidders and
retained two investment banks and legal counsel for advice. Finally,
although the company was the subject of takeover rumors, McAfee and
Computer Associates were the only companies to make a bid. In sum,
plaintiffs have not shown a reasonable probability that they can prove
the Board acted hastily or in an uninformed fashion. Thus, plaintiffs'
duty of care claim fails to meet the first standard required for a
preliminary injunction.
B. The Cheyenne Directors' Duty to Fully Disclose Material
Information
A board of directors must fully and fairly disclose "all material
facts within its control that would have a significant effect upon a
stockholder vote."5 The board is not required to provide all available
information, however, just that which a reasonable investor would view
as "as having significantly altered the 'total mix' of information made
available."6
The heart of plaintiffs' complaint is the allegation that
Cheyenne's 14D-9 did not provide the reasons for Lazard Freres' use of a
21% discount rate and that such information would have significantly
altered the "total mix" of information available by revealing to
shareholders that Lazard Freres' opinion contained a "misleading
statement." In support of their claim, plaintiffs point to Lazard
Freres' opinion which states that Lazard Freres assumed that the
projections of Cheyenne's management were "reasonably prepared on bases
reflecting the best currently available estimates and judgments of
management of the Company as to the future financial performance of the
company." This statement is misleading, according to plaintiffs,
because Lazard Freres based its justification for adding four percentage
points to the seventeen percent industry average cost of capital on its
belief that management's estimates were higher than analyst's
projections and its mistaken impression that Cheyenne had filled to meet
management's projections since 1993.
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4 Smith v. Van Gorkom, Del. Supr., 488 A.2d 858, 872 (1985).
5 Stroud v. Grace, Del. Supr., 606 A.2d 75, 85 (1992).
6 Rosenblatt v. Getty Oil Co., Del. Supr., 493 A.2d 929, 945 (1985),
citing TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976).
<PAGE> 5
As noted by defendants, however, there is no inconsistency between
Lazard Freres' assumption that management's projections were "reasonably
prepared on bases reflecting the best currently available estimates and
judgments" and Lazard Freres' belief that the risk inherent in that
"best currently available" information warranted the use of a higher
discount rate. The statement is not misleading. Currently available
projections still may be subject to special risks--reflected in the
higher discount rate--because of the nature of the computer software
industry. On this record, therefore, I cannot accept plaintiffs' claim
that additional information regarding the discount rate would
significantly alter the total mix of information already available to
Cheyenne's shareholders.
C. The Balance of Hardships
In addition to plaintiffs' failure to demonstrate a likelihood of
success on the merits of their claims, they have also failed to show
that the harm they would suffer if the preliminary injunction were
denied outweighs the harm defendants would suffer if an injunction were
granted. On this alternate ground, therefore, injunctive relief also
should be denied.
It is undisputed that Computer Associates' $30.50 per share tender
offer represents a significant premium over Cheyenne's historical market
price. Computer Associates' final offer is the result of intensive,
arms-length negotiations. Cheyenne had been "in play" for months, and
only one other company, McAfee, made an offer--a stock for stock
proposal with no collar that was significantly less advantageous for
Cheyenne shareholders. Computer Associates' proposal is an all-cash
offer at a premium over market, with $30.50 available for all shares
tendered now or acquired in the follow-up merger. Not only is Computer
Associates' offer a substantially greater value than any other offer, it
is undisputedly the only offer now available to Cheyenne's shareholders.
No other company has even made an inquiry since Computer Associates'
proposal was announced on October 7. Computer Associates has committed
$1.2 billion in cash to make its tender offer, which closes on November
8. It will incur substantial costs if the closing date is delayed by an
injunction. Moreover, the merger agreement contains an "injunction out"
providing Computer Associates the opportunity to revoke its offer if it
is judicially restrained. Computer Associates' representative has
stated that the price will not be renegotiated and that Computer
Associates has no reason to extend its offer in the event an injunction
were issued.7 Thus, Cheyenne has no assurance that if I were to issue
an injunction, Computer Associates will voluntarily extend its offer.
Plaintiffs insist that a minor delay in the tender offer closing
date would risk little, if any, harm to defendants, and yet would afford
Cheyenne's Board an opportunity to investigate the transaction more
fully and to provide additional information to shareholders.
Furthermore, plaintiffs contend that shareholders who are concerned
about receiving their $30.50 per share can obtain virtually all of that
amount in the market, which has responded to Computer Associates' offer
by driving Cheyenne's stock slightly above $30 per share.
A number of cases in this Court have held that, absent special
circumstances not present here, a preliminary injunction will not issue
to restrain a third-party tender offer at a substantial premium over
market. As Chancellor Allen said in Solash v. Telex Corp.:8
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7 S. Kumar Affidavit 20.
8 Del. Ch., C.A. Nos. 9518, 9525 and 9528, Allen, C. (Jan. 19, 1988),
slip op. at 33.
<PAGE> 6
[T]he balance of harm in this situation in which there is
no alternative transaction and issuance of the injunction
inescapably involves a risk that the shareholders will
lose the opportunity to cash in their investment at a
substantial premium requires not only a special
conviction about the strength of the legal claim
asserted, but also a strong sense that the risk in
granting the preliminary relief of an untoward financial
result from the stockholders' point of view is small.
Repeatedly the plaintiffs' class action bar exhorts the
court to bravely risk the consequences in circumstances
such as these, asserting that more money to the
shareholders, not less, will probably result. At least
on facts such as these, a due respect for the interests
of the class on whose behalf these exhortations are made,
requires, in my judgment, that the invitations be
declined.
Feeling no "special conviction" about the strength of plaintiffs'
legal claims and mindful of the significant risk that Cheyenne's
shareholders may lose a limited opportunity to sell their stock at a
substantial premium if an injunction were issued, I conclude that the
balance of hardships tips overwhelmingly in favor of defendants.
Furthermore, I cannot accept plaintiffs' suggestion that shareholders
may avoid this risk by immediately selling into the price-adjusted
market. This suggestion is based on the flawed assumption that the
market price of Cheyenne's stock will not react negatively to news that
Computer Associates' tender offer has been enjoined or that Computer
Associates has refused to extend its offer. For all of these reasons, I
deny plaintiffs' application for a preliminary injunction.
IT IS SO ORDERED.
