10:43am PT by Eriq Gardner
Warner Music Shareholder Group Attempts To Stop $3.3 Billion Sale
Warner Music Group is facing a pair of shareholder lawsuits over its announced sale earlier this month to Access Industries for $3.3 billion. One shareholder class is demanding that a New York Supreme Court judge put a stop to the sale.
WMG announced its sale on May 6th to Access, led by Russian-American tycoon Leonard Blavatnik. Access agreed to buy stock at $8.25 a share, which represented a 4.4% premium on the stock's closing price the previoius day.
Since the music industry has been ravaged by piracy and declining CD sales, many industry observers believed at the time that WMG got the better end of the transaction. Standard & Poor's equity analyst Tuna Amobi called it "one of the best deals in the music space of all time" for the seller.
That's not stopping shareholders from complaining.
One class action lawsuit filed in New York says that WMG executives failed to obtain "the highest value available for WMG in the marketplace."
The shareholders point to evidence of surging digital sales, but take most issue with the sale process itself. Specifically, shareholders are objecting to Warner CEO Edgar Bronfman Jr.'s $13.6 million payout as a result of transaction, thanks to the vesting of previously granted restricted stock.
The class action says that Bronfman and other major shareholders who own 56% of the company have already agreed to the sale, meaning "minority shareholders, such as plaintiffs, will have no meaningful way to stop the proposed transaction through a shareholder vote."
The deal also allegedly had a number of deal protection devices that would impede other potential acquirers.
The New York lawsuit filed late last week follows a similar shareholder lawsuit in Delaware court that accuses Warner and its leaders of breaching fiduciary duty by accepting Access terms without sufficiently hunting for other buyers.