Hell still hath few furies like a shareholder with legal representation feeling scorned. In what seems to be the first but most likely not the last such legal move, a Time Warner Cable shareholder has launched a potential class action suit against the company to halt its acquisition by Comcast in a $45.2B all-stock deal. Filing in the Supreme Court of New York (read it here) one day after the TWC-Comcast deal was formally announced on February 13, Breffni Barrett is accusing TWC, its chairman and CEO Rob Marcus, former Sen. John Sununu and other members of the company’s board of cutting themselves a sweet deal and breach of fiduciary duty. The shareholder also says in the action, which also names Comcast as a defendant, that the mega-merger risks regulatory wrath. Of course, while it is easy to file an action such as this one, it is very hard to prove that a board acted as badly as Barrett alleges — especially when it had its own teams of lawyers going over every detail before anything was made public. Additionally, the merger is subject to approval by shareholders from both companies as well as a careful look from both the FCC and the Department of Justice. Put together, those facts mean there is little chance of Barrett’s filing stopping much of anything.
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Wall Street Sees Mixed Impact From Cable Mega-Merger Plans Claiming a bad price and sales process, the 29-page action on behalf of TWC stockholders wants an injunction to stop the mega-merger unless shareholders get better terms and TWC execs properly “exercise their fiduciary duties to commence a sale process that is reasonably designed to secure the best possible consideration for Time Warner and obtain a transaction which is in the best interests of Time Warner shareholders.” Part of Barrett’s decision to pursue the legal angle is the big bucks in change-of-control payments plus the “over $60 million in special payments for currently unvested stock options, performance units, and restricted shares, all of which shall, upon the closing of the Proposed Transaction, become fully vested and exercisable” for TWC officers and directors. The shareholder also wants the filing to be declared a class action so others can jump in. Still, another big concern of Barrett’s Don Quixote of a lawsuit is just how big the newly merged company would become. Given Comcast’s dominance in the cable industry, Time Warner’s merger with Comcast raises antitrust issues that another potential acquirer, like Charter for example, may not have faced,” claim the plaintiffs lawyers at NYC firms Wolf Haldenstein Adler Freeman & Herz LLP and Robbins Arroyo LLP. “Any bid for Time Warner Cable would have to be approved by both the Federal Communications Commission and the U.S. Department of Justice, which have a record of bringing antitrust enforcement actions against would-be mergers that they believe will harm competition,” they add. TWC and Comcast already have said that the latter will shed systems it currently owns that service around 3 million subscribers in order to stay to avoid “competitive concerns.” But while that may or may not help satisfy the government, still expect this filing and the others surely to follow it to drag out a bit like bad community theater.
Deadline's Dominic Patten - tip him here.