A Warner Music Group shareholder has filed a class-action suit against the company and its directors, alleging that the proposed $3.3 billion sale of the firm to Len Blavatnik’s Access Industries is a raw deal for minority investors.
Action, filed Thursday in New York State Supreme Court, claims that WMG chairman-CEO Edgar Bronfman Jr. and the company’s board breached their fiduciary duty by accepting Blavatnik’s bid instead of a higher offer from billionaires Tom and Alec Gores’ companies.
Calling the sale price “grossly inadequate consideration,” suit seeks to block consummation of the deal; in the event the sale is finalized, it seeks damages from the defendants.
A similar action was reportedly filed against WMG on May 12 by another shareholder plaintiff in Delaware Chancery Court.
Also named in stockholder Derek Cournoyer’s New York complaint are directors Thomas H. Lee and Scott M. Sperling, who were partners with Bronfman in the 2004 purchase of WMG from Time Warner, as well as the company’s other directors. Access and its subsidiary Airplanes Merger Sub, formed to facilitate the purchase, are also defendants.
“WMG, if properly exposed to the market for corporate control, would bring a price materially in excess of the amount offered in the proposed transaction,” the suit claims.
It notes pointedly that Blavatnik, a former member of the WMG board for four years, is a personal friend of Bronfman, and is expected to keep the firm’s current management on board after the sale is completed.
According to the action, the Gores’ firms Platinum Equity and the Gores Group were considering a bid of between $8.35 and $8.50 per share for WMG, topping Access’ successful bid of $8.25 per share.
Suit notes that since the sale agreement requires a payment to Blavatnik of $56 million if a superior offer is accepted, “shareholders will not benefit from the Gores’ higher offer,” since a price of $8.61 per share would be necessary to cover the termination fee.
The agreement with Blavatnik “contains a number of deal protection devices that will impede a potential acquirer from making a higher offer,” the filing says.
Proxy statement filed with the SEC by WMG on Friday indicates that just before the announcement of the deal with Access on May 6, the company’s board passed on a bid of $8.50 per share from a consortium of unidentified bidders, owing to the “conditionality” of the bid.
A WMG spokesman had no comment.