1:05pm PT by Eriq Gardner
Meet the Folks Suggesting Comcast Should Be Paying More for DreamWorks Animation
Wanted: A DreamWorks Animation shareholder who thinks Jeffrey Katzenberg sold cheap.
With the stock of the animation studio up nearly 22 percent since the April 28 announcement of Comcast's proposed $3.8 billion acquisition, and with the Wall Street consensus being that Katzenberg fetched, in Cowan and Company analyst Doug Creutz's words, "an attractive price," it might seem inconceivable that there are naysayers out there.
But tell that to the class of folks known as class-action lawyers.
Willie Briscoe at The Briscoe Law Firm has sent out an alert to DWA shareholders, stating, "The investigation centers on whether DreamWorks’ Board of Directors is acting in the shareholders’ best interests, whether the board is properly negotiating a higher share price for the shareholders, and whether the board has employed an adequate process to review and act on the proposed transaction."
He's not alone.
There's also Juan Monteverde at Faruqi & Faruqi looking into "how much this proposed transaction undervalues the Company to the detriment of DreamWorks Animation’s shareholders," as well as Seth Rigrodsky at Rigrodsky & Long talking about the possibility of "whether DreamWorks’s board of directors failed to adequately shop the Company and obtain the best possible value for DreamWorks shareholders," and let's not fail to mention Charles Piven at Brower Piven sure-to-be-scintillating investigation into "whether the Board adequately pursued alternatives to the acquisition and whether the Board obtained the best price possible for the Company’s shares of common stock."
None of these lawyers responded to a request for explanation.
Of course, it's not particularly surprising that a big acquisition would trigger a class-action lawsuit. If Warner Bros. paid $10 for an apple, there's probably a lawyer out there who would litigate it. According to a review of 2014 M&A litigation by Cornerstone Research, 93 percent of M&A deals valued over $100 million brought shareholder lawsuits that year. It was actually down slightly from the previous year (although up sharply from a decade ago, when less than half of big M&A deals were challenged in court).
Maybe what's more eyebrow-raising is that most of the lawsuits yield very little for plaintiffs. A 2014 lawsuit led by shareholder Breffni Barett over Comcast's proposed acquisition of Time Warner Cable, later amended to be over Charter's proposed acquisition of Time Warner Cable, is pretty indicative. That litigation settled last September for a mere supplemental disclosure filed with the SEC. The study from Cornerstone appears to indicate this is the norm with 80 percent of settlements providing only a disclosure. Of 78 settlements that year, just six provided monetary consideration to shareholders with just one case going to trial in 2014. But that one (over Warburg Pincus' buyout of Mural/Metro Corp.) was certainly rewarding, with a $76 million damages award.
Though shareholders and analysts seem to believe Comcast paid enough for Shrek and Kung Fu Panda, there's some folks out there with a $76 million dream.