General Atlantic, Francisco Partners sue over break-up fee

The two private equity firms have filed a lawsuit against Aeroflex, which last month terminated its $1 billion buyout agreement with the pair in favour of a higher offer from Veritas.

Technology company Aeroflex is being sued by General Atlantic and Francisco Partners for allegedly breaching the termination clauses of their $1 billion (€740 million) merger agreement. Aeroflex terminated the agreement on 25 May, after accepting a $1.1 billion offer from a consortium led by Veritas Capital and financed by Veritas, Goldman Sachs and Golden Gate Capital.

Aeroflex, GA and Francisco apparently disagree as to whether the termination fee owed is a “company termination fee”, equivalent to $30 million as per their merger agreement, or a “parent termination fee”, equivalent to $22.5 million. The merger agreement also states that in certain circumstances relating to termination, Aeroflex is expected to pay the private equity firms $7.5 million for expenses incurred.

According to a document filed by Aeroflex with the Securities and Exchange Commission, the suit alleges the higher fee is owed because Veritas, Golden Gate and Goldman were not “excluded parties” under terms of the merger agreement.

Aeroflex said in the filing that “the allegations in the complaint are without merit”, and that it intends “to defend against them vigorously”.

General Atlantic declined to comment.