The absence of financial projections for Hulu in SEC filings are among the ommissions alleged to violate securities rules.
The sale of 21st Century Fox’s studio assets to Disney has triggered the first lawsuit from a shareholder, who complains about what was filed with the Securities and Exchange Commission. The putative class action seeks to enjoin the transaction.
Robert Weiss, leading other shareholders, filed his lawsuit on Friday in Delaware federal court.
The lawsuit alleges that a proxy statement filed on June 28 omits or misrepresents the company’s financial projections and the data underlying financial valuation analyses from Goldman Sachs and Centerview Partners. The complaint further contends that Goldman’s potential conflicts of interest have not been adequately disclosed.
“In short, unless remedied, 21CF’s public stockholders will be forced to make a voting or appraisal decision on the Proposed Transaction without full disclosure of all material information concerning the Proposed Transaction being provided to them,” states the complaint.
In the midst of a bidding war with Comcast, Disney has proposed $38 per share in cash and stock for Fox’s assets. The proposed deal has already won approval from the Justice Department with the condition that Fox’s regional sports networks are divested. Disney has agreed to this condition.
Regarding alleged material omissions in the proxy statement, the shareholder lawsuit complains about the absence of projections or forecasts for Hulu as well as earnings estimates for European broadcaster Sky in future years.
The objecting shareholder also wants more information about debt and raises concerns about how a Goldman affiliate was asked to act as an underwriter, placement agent and bookrunner in connection with Fox’s possible incurrence of permanent debt financing. This is presented as a potential conflict given the investment bank’s role in issuing its fairness opinion.
Fox and its board are accused of various securities violation, and if the Fox-Disney transaction isn’t enjoined on a preliminary basis, the shareholder would like the deal later rescinded with an award of rescissory damages. The plaintiffs are represented by attorneys at Weisslaw and O’Kelly Earnst & Joyce.
Fox declined comment about the lawsuit.