Foundry postpones vote on Brocade merger, shareholder votes come up short
Foundry Networks adjourns shareholder vote on Brocade merger until Wednesday, after failing to get enough investors to sign off on the deal on the first attempt.
Update at 4:45 p.m. PDT, with information from Foundry's proxy filing on adjourning the meeting to get more shareholder votes.
Foundry Networks delayed a meeting to vote on its merger with Brocade Communications Systems until next week, after failing to get enough investors to support the deal.
Foundry called a special shareholders meeting at 10 a.m. PDT on Friday to vote on its proposed merger with Brocade, which was valued at approximately $3 billion when it was announced in July.
But shortly before 2 p.m., Foundry announced it would adjourn the meeting until Wednesday at 4 p.m.
In a statement, Foundry said: "Given recent developments related to the transaction, its special meeting of stockholders scheduled to be held today, Friday, October 24, 2008, has been adjourned until Wednesday, October 29."
Two hours before the markets closed at 1 p.m. on Friday, Foundry's stock went into a tailspin, falling nearly 26 percent to close at $12.67 a share.
According to Foundry Networks'
If Foundry fails to receive a sufficient number of votes to adopt the merger agreement, Foundry may propose to adjourn the Foundry special meeting, if a quorum is present, for the purpose of soliciting additional proxies.
Foundry currently does not intend to propose adjournment at the Foundry special meeting if there are sufficient votes to approve Proposal No. 1 (passage of the merger). If the proposal to adjourn the Foundry special meeting for the purpose of soliciting additional proxies is submitted to stockholders for approval at the Foundry special meeting, such approval requires the affirmative vote of the holders of a majority of the shares present and entitled to vote, either cast in person or by proxy at the Foundry special meeting. All abstentions will have the effect of a vote against the proposal. Broker non-votes will have no effect.
Over the past three weeks, Brocade has made two funding announcements surrounding the Foundry acquisition.
Brocade, which agreed to pay $18.50 a share in cash and 0.0907 of a Brocade share for every Foundry share, announced on October 7 that it secured $1.2 billion in loans and revolving credit from Bank of America and a week later announced plans to also offer $400 million in senior notes, or corporate debt.
A decision to adjourn a shareholders meeting is a common move a company may take, if it appears it is not collecting enough shareholder votes in its favor, noted one proxy solicitor.
"A company will open the meeting in the morning, then call a recess until the afternoon to allow more votes to come their way. And if they still don't have enough votes, they may decide to adjourn the meeting to give them more time to reach out to shareholders who didn't vote," said the proxy solicitor.
Foundry representatives declined to comment, other than pointing to their company statement.