A public employees union has sued Jeffrey Katzenberg, accusing the DreamWorks Animation CEO of improperly profiting from a lucrative “side deal” that he made as part of the company’s $3.8 billion sale to Comcast Corp.
The Ann Arbor City Employees Retirement System, a DreamWorks shareholder, claimed in a suit filed in Delaware Chancery Court that Katzenberg breached his fiduciary duty to shareholders when he reached an agreement that will pay him 7% of profits, in perpetuity, from a subsidiary he will head — DreamWorks New Media.
The suit called the arrangement an “extraordinarily valuable” offshoot of the $41-per-share deal DreamWorks cut with Comcast. The purchase is set to close by the end of 2016.
At the close of the deal, Katzenberg will shift from CEO of the cartoon maker to chairman of DreamWorks New Media, overseeing Awesomeness TV and a 3D animation business. His base pay will be just $1, but with the profit-sharing added on he stands to make much more.
“Had Katzenberg not received the extraordinarily valuable side deal, Comcast would have been required to increase the merger price to secure Katzenberg’s support,” the lawsuit said. It said such an arrangement violated the corporation’s charter and that minority shareholders are entitled to the same treatment in a sale as the CEO.
If he loses the case, Katzenberg could be forced to pay damages, including a share of the profits from the new media deal.