SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 6 TO
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
CHEYENNE SOFTWARE, INC.
(Name of Subject Company)
CHEYENNE SOFTWARE, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
16688810
(CUSIP Number of Class of Securities)
MICHAEL B. ADLER
VICE PRESIDENT AND
GENERAL COUNSEL
CHEYENNE SOFTWARE, INC.
3 EXPRESSWAY PLAZA
ROSLYN HEIGHTS, NEW YORK 11577
(516) 465-4000
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
COPY TO:
BARRY A. BRYER
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6150
(212) 403-1000
<PAGE>
This Amendment No. 6 to Schedule 14D-9 Solicitation/
Recommendation Statement amends and supplements the Schedule
14D-9 Solicitation/Recommendation Statement (as amended or
supplemented from time to time, the "Schedule 14D-9") filed
with the Securities and Exchange Commission (the "Commission")
on October 11, 1996 by Cheyenne Software, Inc. (the "Company").
This Schedule 14D-9 relates to the tender offer described in
the Tender Offer Statement on Schedule 14D-1 dated October 11,
1996 (as amended or supplemented from time to time, the
"Schedule 14D-1"), filed by Tse-tsehese-staestse, Inc., a Dela-
ware corporation (the "Purchaser"), which is a wholly owned
subsidiary of Computer Associates International, Inc., a Dela-
ware corporation ("CA"), with the Commission relating to an
offer (the "Offer") by the Purchaser to purchase all the issued
and outstanding shares of common stock of the Company
("Shares") at a price of $30.50 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to
the conditions set forth in the Purchaser's Offer to Purchase
dated October 11, 1996, as amended or supplemented, and the
related Letter of Transmittal. All capitalized terms not
defined herein have the meaning assigned to them in the
Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
A copy of the memorandum opinion from the Court of Chancery of
the State of Delaware denying a motion to preliminarily enjoin
consummation of the Offer is attached hereto as Exhibit 16 and
incorporated herein by reference. A copy of the press release
issued by the Company and CA announcing such decision was
previously filed as Exhibit 15 and is also incorporated herein
by reference. The foregoing description is qualified in its
entirety by reference to such exhibits.<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
1 Merger Agreement*
2 Rights Agreement Amendment*
3 Opinion of Lazard Freres, dated October 7, 1996
(Attached as Annex B to Schedule 14D-9 mailed to
stockholders)*
4 Press Release of the Company and CA, issued
October 7, 1996*
5 Confidentiality Agreement dated October 1, 1996
between CA and the Company*
6 Article Nine of the Restated Certificate of
Incorporation of the Company*
7 Section Seven of the Restated By-Laws of the Company*
8 Letter dated October 11, 1996 from ReiJane Huai to
the stockholders of the Company (Included with
Schedule 14D-9 mailed to stockholders)*
9 Amended Class Action Complaint in Lia Moskowitz v.
ReiJane Huai, et. al. and in Miles Tepper v. ReiJane
Huai et. al. filed in the Court of Chancery of the
State of Delaware*
10 Press Release of the Company, issued October 22, 1996*
11 Press Release of the Company and CA, issued October 25,
1996*
12 Press Release of the Company and CA, issued November 4,
1996*
13 Revised Opinion of Lazard Freres, dated as of October 7,
1996*
14 Further Revised Opinion of Lazard Freres, dated as of
October 7, 1996*
15 Press Release of the Company and CA, issued November
7, 1996*
16 Memorandum opinion issued November 7, 1996 by the
Court of Chancery of the State of Delaware
_____________________
* Previously filed.
-2-<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowl-
edge and belief, I certify that the information set forth in
this statement is true, complete and correct.
November 8, 1996
CHEYENNE SOFTWARE, INC.
By /s/ Elliott Levine
Name: Elliot Levine
Title: Executive Vice
President,
Senior Financial
Officer
and Treasurer
-3-
EXHIBIT 16
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
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.<PAGE>
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<PAGE>
Asserting breach of the fiduciary duties of due care
and full disclosure by a target board of directors, sharehold-
ers 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 inter-
ests 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 technol-
ogy 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
1<PAGE>
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 Associ-
ates 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 pre-
liminary conclusion that $30 per share or more in cash would be
a 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
2<PAGE>
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 Associ-
ates 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.
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 nonethe-
less 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
3<PAGE>
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, I 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
_____________________
1 Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., Del.
Supr., 506 A.2d 173, 179 (1986).
4<PAGE>
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 the
directors acted on an informed basis, plaintiffs must show that
the Board acted with gross negligence.4
_____________________
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).
4 Smith v. Van Gorkom, Del. Supr., 488 A.2d 858, 872
(1985).
5<PAGE>
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 compe-
tence. 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 com-
binations of discount rates and growth rate projections pro-
vided by both Cheyenne management and computer industry ana-
lysts. Finally, there is no indication that the Board acted
hastily. Cheyenne's Board had considered a sale or other busi-
ness 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
6<PAGE>
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 sig-
nificant 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
_____________________
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).
7<PAGE>
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 failed to meet management's projections since
1993.
As noted by defendants, however, there is no incon-
sistency 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 infor-
mation 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 pre-
liminary injunction were denied outweighs the harm defendants
8<PAGE>
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 com-
pany, 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 val-
ue 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 No-
vember 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
9<PAGE>
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 defen-
dants, and yet would afford Cheyenne's Board an opportunity to
investigate the transaction more fully and to provide addi-
tional 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' of-
fer by driving Cheyenne's stock slightly above $30 per share.
A number of cases in this Court have held that, ab-
sent special circumstances not present here, a preliminary in-
junction 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
[T]he balance of harm in this situation in
which there is no alternative transaction and
issuance of the injunction inescapably in-
volves a risk that the shareholders will lose
the opportunity to cash in their investment
at a substantial premium requires not only a
special
_____________________
7 S. Kumar Affidavit Paragraph 20.
8 Del. Ch., C.A. Nos. 9518, 9525 and 9528, Allen, C.
(Jan. 19, 1988), slip op. at 33.
10<PAGE>
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 conse-
quences in circumstances such as these, as-
serting 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 judg-
ment, 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 over-
whelmingly in favor of defendants. Furthermore, I cannot ac-
cept 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 mar-
ket 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 pre-
liminary injunction.
IT IS SO ORDERED.
11<PAGE>
