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Ex-Groove exec loses initial bid to nix Microsoft deal

Judge refuses to grant request for temporary restraining order. All other major investors have approved the deal.

An ex-Groove Networks executive suffered a legal setback on Friday in his bid to block Microsoft's takeover of his former company.

A Delaware Chancery Court judge refused to grant Michael Matthews' request for a temporary restraining order blocking the deal, according to a statement released by Groove. Matthews is a principal investor in Groove and a former executive vice president who left the company in April 2002.

"Mr. Matthews' attempt to block the acquisition of Groove Networks by Microsoft by way of a temporary restraining order was denied this afternoon in Delaware Chancery Court by Chancellor William B. Chandler III," Groove said. "Groove Networks and Microsoft are proceeding toward closing of the transaction according to the terms of the merger agreement."

Matthews' suit, filed last week, seeks to block the deal under its present terms, according to reports by Bloomberg News and the Boston Business Journal. Matthews' suit charges that the deal is unfair to some employees who hold preferred and common stock, according to the reports.

Matthews, now chief marketing officer at Amdocs, could not immediately be reached for comment.

Groove said that Microsoft's acquisition, which was announced on March 10, has been approved by all of the company's major investors except for Matthews.

In a statement, Microsoft said it is not a party to Matthews' suit and that the two companies remain separate until the deal is officially closed.

"Microsoft and Groove remain committed to our shared vision for providing software and services that help individuals collaborate naturally and easily, both within and beyond organization boundaries," Microsoft said. "We look forward to adding Groove technologies to the line-up of Microsoft Office system servers, applications and services following the close of the acquisition."